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European Commission

Press release

Brussels, 5 July 2012

Short selling: Commission adopts delegated act detailing rules on the ban on uncovered sovereign credit default swaps and short sales of shares and sovereign debt

The European Commission has today adopted a Delegated Act which sets out important technical rules needed to ensure the uniform application and enforcement of the Short Selling Regulation1. In particular, the delegated act 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 in the Act 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 Commission today, based on a draft submitted by the European Securities and Markets Authority (ESMA).

Commissioner Barnier said: "We cannot tolerate speculation on uncovered sovereign credit default swaps. The ban on such credit default swaps is a key provision of the Short Selling Regulation, to ensure that these instruments are used for legitimate hedging purposes only. The delegated act adopted by the Commission will ensure this ban is applied by market participants and enforced by regulators in a uniform way."


The delegated act also details technical rules on a number of other key issues, including:

  • how to calculate the significant short positions that must be disclosed to regulators or the market;

  • how short positions are calculated and reported by fund managers managing several funds, or different entities within a group;

  • the levels at which short positions in sovereign debt must be notified to regulators;

  • the thresholds for different financial instruments, ranging from illiquid shares to financial derivatives, which can trigger a short term suspension of short selling by regulators;

  • the decline in liquidity which triggers the possibility for Member States to suspend restrictions on uncovered short sales of sovereign debt; and

  • the criteria to be taken into account when determining what constitutes an adverse development or event.

The Implementing Regulation will enter into force on the day following its publication in the Official Journal of the European Union, 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.

The delegated act was drafted by the Commission, taking into account the technical advice received from ESMA, as well as the findings of the Commission's impact assessment report. The Commission also carried out appropriate consultations during its preparatory work on the delegated act with Member State experts in the expert group of the European Securities Committee, the European Parliament and the European Central Bank.

The delegated act is part of a package of four implementing measures adopted by the Commission to specify technical aspects of the Short Selling Regulation. A delegated regulation on regulatory technical standards was also endorsed by the Commission today, based on draft regulatory technical standards submitted by ESMA. This sets out the technical details of how to calculate the significant fall in value which can trigger a short term suspension of short selling in certain financial instruments.

An implementing regulation concerning implementing technical standards and a delegated regulation on regulatory technical standards were already adopted by the Commission on 29 June (see IP/12/727 and MEMO/12/508).

Together, this package of four Commission implementing measures adopted by the Commission sets out all the technical details which the Commission is empowered to adopt by the Short Selling Regulation. However, the delegated act adopted today is subject to a three month objection period of the European Parliament and the Council and will only enter into force, provided that neither co-legislator objects, at the end of this three month period and the day following publication in the Official Journal.

More information

See also MEMO/12/523

Short Selling Regulation and text of the delegated act

Contacts :

Stefaan De Rynck (+32 2 296 34 21)

Carmel Dunne (+32 2 299 88 94)

Audrey Augier (+32 2 297 16 07)

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