EUROPE: SMSG Advice to ESMA on EU Short Selling

Wednesday May 30 2012

ESMA has published advice that it has received from the Securities and Markets Stakeholder Group (SMSG) on possible Delegated Acts concerning the Regulation on EU Short Selling and certain aspects of credit default swaps.

The Securities and Markets Stakeholder Group believe that adapted Delegated Acts and their efficient enforcement are crucial to meet the goals of the Regulation on EU Short Selling, namely to address the risks associated with short selling while not undermining the benefits of it, in order to ensure a high level of investor protection and to protect the integrity of European financial markets.

It generally supports ESMA’s proposed Delegated acts and Draft technical standards. However, the Group believes that a “third party” and the legal person entering into a short sale, should not necessarily be required to be part of different legal entities for the purpose of the “locate rule”, as long as the proper procedures have been put in place. Additionally, the Group believes that the location of a financial instrument is only one criterion to be used to determine its correlation with a sovereign debt risk for the purpose of determining whether a financial instrument is hold for the purpose of hedging against sovereign risk. Finally, the Group believes that the suggestions in respect to price movements are appropriate as long as these do not automatically trigger a suspension of short selling.

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