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EC consults on derivatives and naked shorting rules

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  • EC consults on derivatives and naked shorting rules

EUROPE - The European Commission is asking interest groups for fast input on various points as it draws up its own proposals to regulate derivatives and naked shorting.

Both positions are due in early September.

Two consultation exercises are being opened, each with a closing date for the answering of questions, set at 10 July.

Announcing both consultations, David Wright, deputy director general of the Commission's internal market division, said the Commission wanted information from EU member states, market participants and other stakeholders on the measures aimed at making derivatives markets and market infrastructures more resilient.

The aim is to avoid fragmentation, he said.

The questionnaire, which contains detailed notes on various options under consideration, says the Commission's moves follow outline positions agreed by the G20.

It is now in the process of finalising its draft legislative proposals.

Before doing so, it needs to obtain views on four specific issues.

These concern clearing and risk mitigation of over-the-counter derivatives, requirements for central counterparties, interoperability and reporting obligations and requirements for trade repositories.

On proposed rules for short selling, the EC said pan-EU harmonisation would increase the "resilience and stability of financial markets".

Wright noted that, at present, the member state governments were applying different rules. Eight have banned shorting, while another seven have applied temporary bans. 

The EC said policy options could be grouped into three types: rules to increase transparency related to short sales rules to reduce risks of uncovered short selling; and, emergency powers for competent authorities to impose temporary short selling restrictions. 

Reactions to the consultations will be assessed during the summer break.

The questionnaire on short selling is available here, while the one on derivatives is available here.

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