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Benedicte Gravrand, Opalesque Geneva:

On November 15, 2011, the European Parliament approved the final text of the regulation on short selling and certain aspects of credit default swaps (CDSs) rules. This text will be approved by the EU council in the coming weeks and the regulation will come into effect a year from now.

It will introduce (1) restrictions and disclosure requirements on persons short selling EU shares and sovereign bonds, and (2) prohibit naked CDSs relating to EU sovereign debt.

According to the November issue of the "International Despatch" report from Akin Gump, an international law firm, the EU Commission thought to address the three main risks of short-selling, namely lack of transparency, negative price spirals, and naked short selling settlement. CDSs are included because they can be used "to secure a position economically equivalent to a short position in the underlying bonds."

Graeme Bell, Counsel at Akin Gump and author of the piece, describes the key provisions of the regulation as such:

Disclosure of short positions Investors will have to let authorities know of any "net short positions" (here including positions in derivatives) ......................

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