EU Regulation No 236/2012 on short selling and certain aspects of credit default swaps (the "Short Selling Regulation") will be fully applicable on 1 November 2012. It is supplemented by delegated regulations which focus on technical elements.
The objective of the short selling legislative framework is to increase transparency and to reduce settlement and other risks associated with naked or uncovered short selling.
On 10 October 2012, a Questions and Answers Paper ("Q&A") on the implementation of the Regulation was published by the European Securities and Markets Authority ("ESMA"), which updates the previously issued Q&A on 13 September 2012.
Article 17 of the Short Selling Regulation provides for exemption in market making activities and primary market operations. Notification of the exemption intent is to be made to the home authority of the notifying entity's member state although the exempted activities may be taking place in other jurisdictions.
On 17 September 2012, ESMA published a consultation paper on Exemption for market making activities and primary market operations under the Short Selling Regulation (the "Draft Guidelines").
The aim of the Draft Guidelines is to assist the notifying entity in the notification process and to develop a common approach to submitting the notification form. A template notification form is provided.
Further, in order to improve consistency of market practices for market users and regulatory authorities of Member States it provides clarity on the criteria to be met in applying the market making exemptions and the conditions used in assessing the applications.
The draft guidelines identify the following:
- the scope of the exemption for money market activities;
- how the relevant competent authority for notification is defined;
- guidelines for the notification process in the use of the exemption; and
- transitional measures relating to the sending of the notification.
Responses were requested by 5 October 2012.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
