Brussels, 29/06/2012 (Agence Europe) - The European Commission has said in a press release that, on 29 June, it set out in an implementing regulation the detailed rules aimed at reducing the risk of settlement failures linked to naked short selling, and also the means by which market participants should disclose significant short positions to the market. Two further implementing measures on Regulation 236/2012 (on short-selling) will be adopted shortly.
The technical standards adopted on 29 June are based on the work of the European Securities and Markets Authority (ESMA). They specify the details of the so-called “locate rule”, which ensures that short sales do not result in a failure to deliver, the press release goes on. The new rules also detail how ESMA is to determine the shares which are exempt from the Short Selling Regulation by virtue of their principal trading venue being outside the EU.
The implementing regulation sets out technical rules, inter alia, on: - information on significant net short positions which is to be disclosed on a central website operated or supervised by the relevant competent authority in a specified format, which allows the public to search the information by share issuer and to see historical data; - the requirements for agreements to borrow (such as options, repurchase agreements, or standing agreements) that ensure settlement of shares can be effected when due; - the requirements for arrangements and measures to ensure settlement in due time of short sales of shares; - the details of arrangements with third parties relating to short sales of sovereign debt; - and the technical rules for ESMA to determine whether the principal trading venue of a share is inside or outside the European Union and subsequently implement the exemption in the short selling regulation for shares whose principal trading venue is outside the EU. The regulation also details the types of third parties, including investment firms and central counterparties, and the requirements they must meet to be eligible to enter into arrangements with short sellers to ensure settlement.
On the same day, 29 June, the Commission also adopted a delegated regulation on regulatory technical standards, based on draft regulatory technical standards submitted by ESMA, the press release says. This second regulation sets out the details of the information on short positions that must be notified to competent authorities and disclosed to the public. It also specifies what information competent authorities must report on a quarterly basis to ESMA, and the method of calculation of turnover for ESMA to determine the principal trading venue of shares. (SP/transl.rt)