Wednesday January 30 2013

News Source: Global Disclosures

Focus: Short Selling

Type: General

Country: European Union




The European Securities and Markets Authority has published an updated Q and A on EU short selling in line with feedback received from market participants. The Q and A was last updated in October 2012.

The following questions have been added:

Scope of the measures

  • Question 1F on ADRs and GDRs
  • Question 1G on ETFs
  • Question 1H on shares pledged as collateral
  • Question 1I on debt instruments issued by a sovereign issuer

Calculation of a net short position

  • Question 3F on “issued share capital” and “savings shares”
  • Question 3H on netting long positions in sovereign debt
  • Question 3J on “single sovereign bond futures”
  • Question 3K on long positions in UCITS funds
  • Question 3L on delta adjustment

Duration adjustment for calculating net short positions in sovereign debt

  • Question 4E on derivatives in sovereign debt
  • Question 4F on Credit Linked Notes

Group calculations

  • Question 5F and 5J on the legal entity within a group required to report
  • Question 5K on reporting by funds

Uncovered short sales

  • Question 7B on extensions of repos
  • Question 7C on telephone call registrations as a “durable medium”
  • Question 7D on length of time of storage of information in a “durable medium”
  • A reminder of the “locate” requirements
  • Question 7K on main national indices
  • Question 7L on intra-day short sales and confirmations
  • Question 7M on “easy-to-borrow” lists

ESMA has also added a new Section 8 on uncovered sovereign CDS, which contains the information previously contained at the end of Section 7, as well as the following new questions:

  • Question 8C on hedging
  • Question 8D on sovereign bonds and static hedges
  • Question 8E on hedging against widening credit spreads
  • Question 8F on “look-through” of an index used for hedging
  • Question 8G on “replacement trades”

As a result of the above change, the sections on market making and primary dealing have been moved.

In addition to new questions, the following questions were updated:

  • Question 3C on convertible bonds and the calculation of a net short position
  • Question 3I on the look-through requirement for baskets and indexes and publicly available information for the calculation of a net short position.

Click on the above link for the Q and A (changes highlighted).