ESMA Publishes Updated Short Selling Regulation Questions and Answers


On October 10, the European Securities and Markets Authority (ESMA) published an update to its Questions and Answers: Implementation of the Regulation on Short Selling (the Q&A). The Q&A, originally issued on September 13 (as reported in the September 14, 2012 edition of Corporate and Financial Weekly Digest), addresses questions arising with respect to the implementation of the EU Regulation on Short Selling and Certain Aspects of Credit Default Swaps (the Short Selling Regulation) which comes into force on November 1. The purpose of the Q&A is to promote common supervisory approaches and practices among national securities markets regulators on the requirements of the Short Selling Regulation.

The key additions in the updated Q&A address:

  • The duration adjustment formula to be used for the calculation of net short positions in sovereign debt; and 
  • Clarification of reporting of net short positions held by funds managed by the same manager.

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In a linked development, on October 11, ESMA published the thresholds for incremental notifications to national regulators with respect to net short positions in sovereign debt. The initial notification thresholds are: (a) 0.1% where the total amount of outstanding issued sovereign debt is 500 billion euros or less; and (b) 0.5% where the total amount of outstanding issued sovereign debt is above 500 billion euros or where there is a liquid futures market for the particular sovereign debt.

ESMA has set the thresholds for additional incremental notifications at 50% of the initial thresholds. The reporting thresholds will be monetary amounts calculated by applying the percentage thresholds to the outstanding sovereign debt of the relevant sovereign issuers. They will be revised and updated quarterly to reflect changes in the total amount of outstanding sovereign debt of each sovereign issuer.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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