Mon, Jun 27, 2016
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. Opalesque Roundup: Hedge funds shrink as liquidations outpace new launches in Q1: hedge fund news, week 27[more]

    In the week ending 17 May, 2016, HFR said hedge fund liquidations declined narrowly to begin 2016 after rising sharply to conclude 2015, as investors positioned f

  2. Europe - Hedge funds keep powder dry over big Brexit bets, Hedge funds sense profit in Europe shock waves after Brexit vote, Soros warns Brexit may cause pound plunge worse than Black Wednesday, After Brexit: What will happen if Britain votes to leave the UK?[more]

    Hedge funds keep powder dry over big Brexit bets From FT.com: Hedge funds are shying away from big bets on Brexit, with many unwilling to risk further losses having already suffered a painful first half of the year. With the outcome of a UK vote on the country’s membership of the Europea

  3. News Briefs - ’Flash Boys’ get green light to launch stock exchange, Pimco says ‘storm is brewing’ in U.S. commercial real estate, Bankers get ready to rumble at Hedge Fund Fight Night, AIMA Australia celebrates 15th anniversary[more]

    ’Flash Boys’ get green light to launch stock exchange In an investing environment ruled by fast, the newest U.S. public stock exchange is banking on slow. Well, slower. IEX Group, which won Securities and Exchange Commission approval on Friday to go head-to-head with the New York Stock E

  4. Blackstone buys minority stake in New York-based credit hedge fund Marathon[more]

    Benedicte Gravrand, Opalesque Geneva: Blackstone Strategic Capital Holdings Fund, a vehicle managed by Blackstone Alternative Asset Management (BAAM), has acquired a passive, minority interest in Marathon Asset Management, for an undisclosed sum. Based in New York,

  5. Investing - Soros, Druckenmiller among hedgies profiting in market plunge, Hedge funds were most bullish on bonds since 2004 before Brexit, Surprise Brexit vote unleashes scramble for dollars, High-yield hit on Brexit but no panic selling, Scientist turned hedge fund founder lured to pound, euro, Hedge fund avoids commodities, posts big gains[more]

    Soros, Druckenmiller among hedgies profiting in market plunge From HITC.com: Bullish positions in gold and volatility and well-timed short bets on China and emerging markets, among other areas, were some of the trades that benefited hedge funds on Friday as markets digested Britons' s