Delegated acts on Short Selling and CDS

The European Commission has adopted delegated acts in relation to Regulation No 236/2012 of 14 March 2012 on short selling and certain aspects of credit default swaps (CDS), which will apply from 1 November 2012.      

The Delegated Regulation details technical rules on a number of key issues, including:

• how to calculate significant short positions;
• how short positions are calculated and reported by fund managers managing several funds, or different entities within a group;
• the levels at which short positions in sovereign debt must be notified to regulators;
• the cases in which sovereign CDS are considered covered;
• the thresholds for different financial instruments which can trigger a short-term suspension of short selling;
• the decline in liquidity which triggers the possibility for Member States to suspend restrictions on uncovered short sales of sovereign debt; and
• the criteria to be taken into account when determining what constitutes an adverse development or event.

The Regulation is accompanied by FAQs and an executive summary of the impact assessment.  The Regulation is subject to a 3 month objection period of the European Parliament and the Council.  The Commission has also published a second Delegated Regulation containing technical standards for the method of calculation of the fall in value for liquid shares and other financial instruments (derivatives and non-derivatives).

Together with an Implementing Regulation and a Delegated Regulation on technical standards (adopted by the Commission on 29 June 2012 but not as yet in force), these will complete the package of Commission implementing measures.  For our longer briefing on the primary provisions, click here.