EC: Short selling

The EC has today adopted a Delegated Act which sets out important technical rules needed to ensure the uniform application and enforcement of the Short Selling Regulation. This specifies the cases in which sovereign credit default swaps are considered covered, and therefore not banned in accordance with the Regulation. Investors can demonstrate that the sovereign credit default swap contracts they have entered into are covered by demonstrating either a quantitative or a qualitative correlation between the hedged assets and liabilities and the sovereign credit default swap. Other issues addressed include technical rules relating to the reporting of short positions in shares and sovereign debt, and the thresholds which can trigger a short term suspension of short selling in illiquid shares and other financial instruments. A related regulatory technical standard on short selling was also adopted by the EC, based on a draft submitted by ESMA. The Implementing Regulation will enter into force on the day following its publication in the Official Journal, and shall apply from 1 November 2012, except for the provisions on the principal trading venue which shall apply from the date of entry into force.