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Esma rebuke on short selling regulation

Tuesday 29 November 2011 - by Will.Henley@gfsnews.com


Steven Maijoor - Photo by Esma
The chairman of the European securities watchdog has expressed frustration at the short space of time given over to write technical standards for the EU short selling regulation, which was approved by parliamentarians earlier this month.

Steven Maijoor suggested in Brussels on Tuesday that curtailing the ideal time for the European Securities and Markets Authority to draft detailed guidelines on the regulation by around eight months would harm its "quality".

"The quality of technical standards is crucial for the proper implementation of directives and standards. Esma has made clear that on average it takes about 12 months to accomplish all steps required for good technical standards.

"A shorter period negatively affects, for example, the possibility to consult with stakeholders like you. In that perspective it is very unfortunate that the recently agreed short selling regulation requires us to deliver technical standards by the end of March 2012," Maijoor added at the European Fund and Asset Management Association conference.

The EU Parliament voted through the regulation to curb short selling and trading in credit default swaps on 13 November, a law pushed by the European Commission in a bid to tackle volatility in the financial markets, pending approval from the European Council. It is scheduled to become law by November 2012.

The original draft regulation put forward by MEPs included a requirement that naked short sales be converted to a normal short sale within a single trading day - known as a "locate and reserve rule". It asked that a trader guarantee that it can borrow the shares.


The final rule merely requires that the trader has a "reasonable expectation" of being able to borrow the shares from the other party. However Esma is charged with determining what may be deemed "reasonable" in its technical guidance.

In his speech, Maijoor also sought to reassure firms that new powers given to Esma under the revised Markets in Financial Instruments regime - to ban certain risky products or activities - would be used only sparingly.

"Our intervention would be limited to certain specific circumstances and a condition for Esma to step in would be that national authorities have not taken any action to address the threat," he said.


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