Sat, Nov 18, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

EU seeks new rules on abusive short-selling

Thursday, September 02, 2010
Opalesque Industry Update – European Union lawmakers are drafting new rules to empower regulators to stop abusive short-selling. At the same time, the draft legislation also aims to ban naked selling of credit default swaps and sovereign debt for three months or more.

EU’s financial chief Michael Barnier is expected to publish the draft measure on Sept. 15, according to Reuters which had access to the proposed law on Wednesday.

The move came after several member-states called for a bloc-wide action against speculators, specifically from hedge funds which they blame for Greek’s credit default, and turmoil within other euro zone sovereign debt markets earlier this year. Many analysts predict that an EU-wide legislation would have a stronger effect than individual measures taken by member-states, that in the past have only created confusion among investors.

Some EU states, including Britain, introduced independent short selling bans on financial shares in the aftermath of Lehman Brother’s collapse in September 2008. Germany enforced a ban on the naked short selling of 10 German stocks, euro government bonds and credit default swaps on euro government bonds in May which shook global markets and upset EU partners who did not adopt the measure. That ban will remain in effect until March 31, 2011

The draft bill seeks to provide extra powers to the new European Securities and Markets Authority (ESMA), which is scheduled to start operating in January 2011. A report by the International Business Times said that ESMA would have the authority to overrule any actions taken by member-states on short-selling. In effect, the proposed measure lifts all short-selling bans in single countries.

The draft rule also calls for the temporary suspension of short-selling instruments or persons should a single share fall by more than 10% on a single day. It also contains provisions on new reporting requirements of market participants.

Investors or traders with exposures in shares and EU government bonds will be required to disclose their positions to their national regulators. For shares, a net short position has to be reported when it reaches 0.2% of the company's share capital, and should be notified publicly when exceeding 0.5%, the report said.

But there are still some apprehensions on how individual member-states will react to the proposed draft.

According to GSL.tv, it remain to be seen how each EU member-state will respond to the draft bill, particularly on the provision giving ESMA the authority to overrule their individual approaches.

Greece lifts short-selling ban
Also on Wednesday, the Greece government lifted its ban on short-selling which is expected to bring back short-trade traders and help boost the ailing economy with increased trading volumes.

The news was welcomed by the markets after Greek stocks gained almost 1% on light volume of 75m euros. Brokers said they predicted volume to pick up soon.

Short-selling consultation
The European Commission (EC) launched a bloc-wide consultation in June on short-selling before deciding to introduce the ban. The consultation was aimed at getting feedbacks from member-states on the back of fragmented approaches on short selling.

Barnier also proposed in June to allow EU market supervisors to impose temporary ban on naked short selling of credit default swaps and shares in times of extreme volatility.
- Komfie Manalo
KM

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Middle East - Saudi-Iran war would create this domino effect of global disaster, Saudi billionaires said to move funds from region to escape asset freeze[more]

    Saudi-Iran war would create this domino effect of global disaster From CNBC.com: Events appear to be spinning out of control in the Middle East, and the threat a Saudi-Iranian war is looking increasingly credible. Make no mistake, an out and out conflict between the two nations would be

  2. Paradise Papers - Robert Mercer's effort to avoid taxes appears in Paradise Papers, Tycoon made $41m from 'people's fund', Oxford and Cambridge 'investing millions of pounds offshore', Paradise Papers reveal[more]

    Robert Mercer's effort to avoid taxes appears in Paradise Papers From Therealnews.com: The Guardian has reported that conservative billionaire and Trump backer Robert Mercer "appears as a director of eight Bermuda companies in the Paradise Papers," the trove of documents reviewed by the

  3. Wall Street hedge fund veteran hits highs with copycat tactics[more]

    From FNLondon.com: A Wall Street veteran who has made big returns for wealthy clients by piggybacking on the strategies of well-known hedge funds is taking his novel approach to stock-picking to institutional clients. Dixon Boardman, chief executive of $2.5bn fund of hedge funds Optima Fund Ma

  4. Launches - Eaton Vance, Oaktree to launch diversified credit NextShares fund, FIM launches Nordic AI-powered fund[more]

    Eaton Vance, Oaktree to launch diversified credit NextShares fund Eaton Vance Management, a subsidiary of Eaton Vance Corp., announced the expected mid-November launch of Eaton Vance Oaktree Diversified Credit NextShares, a new Eaton Vance-sponsored exchange-traded managed fund. Eaton Va

  5. Outlook - Gundlach's stock market warning comes true[more]

    From Bloomberg.com: Jeffrey Gundlach has been warning something's got to give. Based on the past two days, looks like we have our answer. Stocks fell around the world a second day and high-yield bonds headed for a fourth straight loss, resuming a historic correlation that the hedge fund manager on W