Regulation of short selling and certain aspects of credit default swaps
Regulation of short selling in Europe is established not only in Regulation (EU) No 236/2012 on short selling and certain aspects of credit default swaps (EU Short Selling Regulation) but also in four implementing regulations.
These four implementing regulations clarify the provisions of the EU Short Selling Regulation:
- a Delegated Regulation (EU) No 918/2012 inter alia with regard to definitions,
- an Implementing Regulation (EU) No 827/2012 laying down implementing technical standards,
- a Delegated Regulation (EU) No 826/2012 with regard to Regulatory Technical Standards
- as well as another Delegated Regulation (EU) No 919/2012 also with regard to Regulatory Technical Standards.
The European Short Selling Regulation is essentially based on two pillars:
- Prohibiting provisions for uncovered short sales in shares and sovereign debt as well as uncovered sovereign credit default swaps (Articles 12 et seq. of the EU Short Selling Regulation),
- Transparency provisions for net short positions in shares, sovereign debt and, where applicable, credit default swaps (Articles 5 et seq. of the EU Short Selling Regulation).
The provisions of the EU Short Selling Regulation are also applicable outside the EU and to natural or legal persons from third countries. In this regard it does not matter where the transaction in question is concluded nor what nationality the involved parties have nor where they have their registered office.
Exemptions from both the prohibitions and the transparency requirements are provided for the activities of market makers and primary dealers.