Securitisation and Regulation News

Short selling and CDS: ESMA publishes technical advice on possible delegated acts

ESMA has published its technical advice to the European Commission on possible delegated acts concerning the regulation on short selling and certain aspects of credit default swaps (CDS).

In particular, the advice covers:

  • the definition of when a natural or legal person is considered to own a financial instrument for the purposes of the definition of short sale;
  • the net position in shares or sovereign debt covering the concept of holding a position, the case when a person has a net short position and the method of calculation of such a position including when different entities in a group have long or short positions or for fund management activities related to separate funds;
  • cases in which a CDS transaction is considered to be hedging against a default risk or the risk of a decline of the value of the sovereign debt and the method of calculation of an uncovered position in a CDS;
  • the initial and incremental levels of the notification thresholds to apply for the reporting of net short positions in sovereign debt;
  • the parameters and methods for calculating the threshold of liquidity on sovereign debt for suspending restrictions on short sales of sovereign debt;
  • what constitutes a significant fall in value for various financial instruments and also specifies, in the form of a draft regulatory technical standard, the method of calculation of such falls;
  • the criteria and factors to be taken into account by competent authorities and ESMA in determining when adverse events or developments arise.

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