They came. They saw. And they’re out to conquer European short selling.
The headline of a Committee of European Securities Regulators press release, Tuesday afternoon:
CESR recommends the European Institutions introduce a pan-European short selling disclosure regime
In Eurospeak, that means it’s submitted a report to the European Commission. The meat:
CESR recognises that legitimate short selling plays an important role in financial markets…
…However, it can also be used in an abusive fashion to drive down the price of financial instruments to a distorted level and, in extreme market conditions, can have an adverse impact on financial stability. Following the recent financial turmoil, it was widely recognised that for a short selling disclosure regime to be efficient and to ensure transparency for market participants, a convergent pan-European regulatory approach is necessary.
CESR has now acted accordingly. Note that this is a disclosure regime – far from the curbs on short selling imposed in the US last week, and even further from a complete ban.
How would it work, you ask? Best to let CESR explain itself:
Under the proposed regime, at the lower threshold of 0.2%, positions should be disclosed to the relevant competent authority. In addition, steps of 0.1% would trigger further disclosure obligations. After the position reaches the higher threshold of 0.5% and any additional steps of 0.1% thereafter, the position should be disclosed to the competent authority as well as to the market as a whole.
CESR’s chair approves, by the way. Well, Anastassios Gabrielides is the Chairman of the Capital Markets Commission of Greece, after all. FT Alphaville imagines that he’s had quite the time of it with naked CDS positions lately.
With perfect timing, naked CDS has been a hot topic on Alphaville on Tuesday – with anti-ban arguments from Citigroup analysts and Alphaville alum Sam Jones in play.
Hot on CESR’s heels, Dow Jones reports that Hong Kong’s securities agency also rolled out short-selling disclosure rules on Tuesday.
As for Europe, the ball is now in the court of Michel Barnier, the EU’s financial services commissioner. Having already announced an inquiry into sovereign CDS on Tuesday, he certainly has his hands full.
Related links:
The benefits of naked CDS – FT Alphaville
EU starts roll out of share short selling regime – Reuters
EU securities regulators call for short-selling disclosure - WSJ