Potential Exemptions Under The Short Selling Regs

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.