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Document 02012R0236-20220131
Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (Text with EEA relevance)Text with EEA relevance
Consolidated text: Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (Text with EEA relevance)Text with EEA relevance
Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (Text with EEA relevance)Text with EEA relevance
02012R0236 — EN — 31.01.2022 — 002.001
This text is meant purely as a documentation tool and has no legal effect. The Union's institutions do not assume any liability for its contents. The authentic versions of the relevant acts, including their preambles, are those published in the Official Journal of the European Union and available in EUR-Lex. Those official texts are directly accessible through the links embedded in this document
REGULATION (EU) No 236/2012 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 14 March 2012 on short selling and certain aspects of credit default swaps (OJ L 086 24.3.2012, p. 1) |
Amended by:
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REGULATION (EU) No 909/2014 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 23 July 2014 |
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COMMISSION DELEGATED REGULATION (EU) 2022/27 of 27 September 2021 |
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11.1.2022 |
REGULATION (EU) No 236/2012 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 14 March 2012
on short selling and certain aspects of credit default swaps
(Text with EEA relevance)
CHAPTER I
GENERAL PROVISIONS
Article 1
Scope
This Regulation shall apply to the following:
financial instruments within the meaning of point (a) of Article 2(1) that are admitted to trading on a trading venue in the Union, including such instruments when traded outside a trading venue;
derivatives referred to in points (4) to (10) of Section C of Annex I to Directive 2004/39/EC that relate to a financial instrument referred to in point (a) or to an issuer of such a financial instrument, including such derivatives when traded outside a trading venue;
debt instruments issued by a Member State or the Union and derivatives referred to in points (4) to (10) of Section C of Annex I to Directive 2004/39/EC that relate or are referenced to debt instruments issued by a Member State or the Union.
Article 2
Definitions
For the purpose of this Regulation, the following definitions apply:
‘financial instrument’ means an instrument listed in Section C of Annex I to Directive 2004/39/EC;
‘short sale’ in relation to a share or debt instrument means any sale of the share or debt instrument which the seller does not own at the time of entering into the agreement to sell including such a sale where at the time of entering into the agreement to sell the seller has borrowed or agreed to borrow the share or debt instrument for delivery at settlement, not including:
a sale by either party under a repurchase agreement where one party has agreed to sell the other a security at a specified price with a commitment from the other party to sell the security back at a later date at another specified price;
a transfer of securities under a securities lending agreement; or
entry into a futures contract or other derivative contract where it is agreed to sell securities at a specified price at a future date;
‘credit default swap’ means a derivative contract in which one party pays a fee to another party in return for a payment or other benefit in the case of a credit event relating to a reference entity and of any other default, relating to that derivative contract, which has a similar economic effect;
‘sovereign issuer’ means any of the following that issues debt instruments:
the Union;
a Member State, including a government department, an agency, or a special purpose vehicle of the Member State;
in the case of a federal Member State, a member of the federation;
a special purpose vehicle for several Member States;
an international financial institution established by two or more Member States which has the purpose of mobilising funding and provide financial assistance to the benefit of its members that are experiencing or threatened by severe financing problems; or
the European Investment Bank;
‘sovereign credit default swap’ means a credit default swap where a payment or other benefit will be paid in the case of a credit event or default relating to a sovereign issuer;
‘sovereign debt’ means a debt instrument issued by a sovereign issuer;
‘issued sovereign debt’ means the total of sovereign debt issued by a sovereign issuer that has not been redeemed;
‘issued share capital’ in relation to a company, means the total of ordinary and any preference shares issued by the company but does not include convertible debt securities;
‘home Member State’ means:
in relation to an investment firm within the meaning of point (1) of Article 4(1) of Directive 2004/39/EC, or to a regulated market within the meaning of point (14) of Article 4(1) of Directive 2004/39/EC, the home Member State within the meaning of point (20) of Article 4(1) of Directive 2004/39/EC;
in relation to a credit institution, the home Member State within the meaning of point (7) of Article 4 of Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions ( 1 );
in relation to a legal person not referred to in point (i) or (ii), the Member State in which its registered office is situated or, if it has no registered office, the Member State in which its head office is situated;
in relation to a natural person, the Member State in which that person’s head office is situated, or, where there is no head office, the Member State in which that person is domiciled;
‘relevant competent authority’ means:
in relation to sovereign debt of a Member State, or, in the case of a federal Member State, in relation to sovereign debt of a member of the federation, or a credit default swap relating to a Member State or a member of a federation, the competent authority of that Member State;
in relation to sovereign debt of the Union or a credit default swap relating to the Union, the competent authority of the jurisdiction in which the department issuing the debt is situated;
in relation to sovereign debt of several Member States acting through a special purpose vehicle or a credit default swap relating to such a special purpose vehicle, the competent authority of the jurisdiction in which the special purpose vehicle is established;
in relation to sovereign debt of an international financial institution established by two or more Member States, which has the purpose to mobilise funding and provide financial assistance to the benefit of its members that are experiencing or threatened by severe financing problems, the competent authority of the jurisdiction in which the international financial institution is established;
in relation to a financial instrument other than an instrument referred to in points (i) to (iv), the competent authority for that financial instrument as defined in point (7) of Article 2 of Commission Regulation (EC) No 1287/2006 ( 2 ) and determined in accordance with Chapter III of that Regulation;
in relation to a financial instrument that is not covered under points (i) to (v), the competent authority of the Member State in which the financial instrument was first admitted to trading on a trading venue;
in relation to a debt instrument issued by the European Investment Bank, the competent authority of the Member State in which the European Investment Bank is located;
‘market making activities’ means the activities of an investment firm, a credit institution, a third-country entity, or a firm as referred to in point (l) of Article 2(1) of Directive 2004/39/EC, which is a member of a trading venue or of a market in a third country, the legal and supervisory framework of which has been declared equivalent by the Commission pursuant to Article 17(2) where it deals as principal in a financial instrument, whether traded on or outside a trading venue, in any of the following capacities:
by posting firm, simultaneous two-way quotes of comparable size and at competitive prices, with the result of providing liquidity on a regular and ongoing basis to the market;
as part of its usual business, by fulfilling orders initiated by clients or in response to clients’ requests to trade;
by hedging positions arising from the fulfilment of tasks under points (i) and (ii);
‘trading venue’ means a regulated market within the meaning of point (14) of Article 4(1) of Directive 2004/39/EC, or a multilateral trading facility within the meaning of point (15) of Article 4(1) of Directive 2004/39/EC;
‘principal venue’ in relation to a share means the venue for the trading of that share with the highest turnover;
‘authorised primary dealer’ means a natural or legal person who has signed an agreement with a sovereign issuer or who has been formally recognised as a primary dealer by or on behalf of a sovereign issuer and who, in accordance with that agreement or recognition, has committed to dealing as principal in connection with primary and secondary market operations relating to debt issued by that issuer;
‘central counterparty’ means a legal entity which interposes itself between the counterparties to the contracts traded within one or more financial markets, becoming the buyer to every seller and the seller to every buyer and which is responsible for the operation of a clearing system;
‘trading day’ means a trading day as referred to in Article 4 of Regulation (EC) No 1287/2006;
‘turnover’ of a share means turnover within the meaning of point (9) of Article 2 of Regulation (EC) No 1287/2006.
Article 3
Short and long positions
For the purposes of this Regulation, a position resulting from either of the following shall be considered to be a short position relating to issued share capital or issued sovereign debt:
a short sale of a share issued by a company or of a debt instrument issued by a sovereign issuer;
entering into a transaction which creates or relates to a financial instrument other than an instrument referred to in point (a) where the effect or one of the effects of the transaction is to confer a financial advantage on the natural or legal person entering into that transaction in the event of a decrease in the price or value of the share or debt instrument.
For the purposes of this Regulation, a position resulting from either of the following shall be considered to be a long position relating to issued share capital or issued sovereign debt:
holding a share issued by a company or a debt instrument issued by a sovereign issuer;
entering into a transaction which creates or relates to a financial instrument other than an instrument referred to in point (a) where the effect or one of the effects of the transaction is to confer a financial advantage on the natural or legal person entering into that transaction in the event of an increase in the price or value of the share or debt instrument.
For the purposes of paragraphs 1 and 2 the calculation of a short or long position relating to sovereign debt shall include any sovereign credit default swap that relates to the sovereign issuer.
The Commission shall be empowered to adopt delegated acts in accordance with Article 42 specifying:
cases in which a natural or legal person is considered to hold a share or debt instrument for the purposes of paragraph 2;
cases in which a natural or legal person has a net short position for the purposes of paragraphs 4 and 5 and the method of calculation of such position;
the method of calculating positions for the purposes of paragraphs 3, 4 and 5 when different entities in a group have long or short positions or for fund management activities relating to separate funds.
For the purposes of point (c) of the first subparagraph, the method of calculation shall take into account, in particular, whether different investment strategies are pursued in relation to a particular issuer through more than one separate fund managed by the same fund manager, whether the same investment strategy is pursued in relation to a particular issuer through more than one fund, and whether more than one portfolio within the same entity is managed on a discretionary basis pursuing the same investment strategy in relation to a particular issuer.
Article 4
Uncovered position in a sovereign credit default swap
For the purposes of this Regulation, a natural or legal person shall be considered to have an uncovered position in a sovereign credit default swap where the sovereign credit default swap does not serve to hedge against:
the risk of default of the issuer where the natural or legal person has a long position in the sovereign debt of that issuer to which the sovereign credit default swap relates; or
the risk of a decline of the value of the sovereign debt where the natural or legal person holds assets or is subject to liabilities, including but not limited to financial contracts, a portfolio of assets or financial obligations the value of which is correlated to the value of the sovereign debt.
The Commission shall be empowered to adopt delegated acts in accordance with Article 42 specifying, for the purposes of paragraph 1 of this Article:
cases in which a sovereign credit default swap transaction is considered to be hedging against a default risk or the risk of a decline of the value of the sovereign debt, and the method of calculation of an uncovered position in a sovereign credit default swap;
the method of calculating positions where different entities in a group have long or short positions or for fund management activities relating to separate funds.
CHAPTER II
TRANSPARENCY OF NET SHORT POSITIONS
Article 5
Notification to competent authorities of significant net short positions in shares
Article 6
Public disclosure of significant net short positions in shares
Article 7
Notification to competent authorities of significant net short positions in sovereign debt
The Commission shall:
ensure that the thresholds are not set at such a level as to require notification of positions which are of minimal value;
take into account the total amount of outstanding issued sovereign debt for each sovereign issuer, and the average size of positions held by market participants relating to the sovereign debt of that sovereign issuer; and
take into account the liquidity of each sovereign bond market.
Article 8
Notification to competent authorities of uncovered positions in sovereign credit default swaps
Where a competent authority suspends restrictions in accordance with Article 14(2), a natural or legal person who has an uncovered position in a sovereign credit default swap shall notify the relevant competent authority where such a position reaches or falls below the relevant notification thresholds for the sovereign issuer, as specified in accordance with Article 7.
Article 9
Method of notification and disclosure
For the purposes of Articles 5, 6, 7 and 8, natural and legal persons that hold significant net short positions shall keep, for a period of 5 years, records of the gross positions which make a significant net short position.
ESMA shall submit those draft regulatory technical standards to the Commission by 31 March 2012.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
ESMA shall submit those draft implementing technical standards to the Commission by 31 March 2012.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Article 10
Application of notification and disclosure requirements
The notification and disclosure requirements under Articles 5, 6, 7 and 8 apply to natural or legal persons domiciled or established within the Union or in a third country.
Article 11
Information to be provided to ESMA
The competent authority shall provide the requested information to ESMA at the latest within 7 calendar days. Where there are adverse events or developments which constitute a serious threat to financial stability or to market confidence in the Member State concerned or in another Member State, the competent authority shall provide ESMA with any available information based on the notification requirements under Articles 5, 7 and 8 within 24 hours.
ESMA shall submit those draft regulatory technical standards to the Commission by 31 March 2012.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
ESMA shall submit those draft implementing technical standards to the Commission by 31 March 2012.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
CHAPTER III
UNCOVERED SHORT SALES
Article 12
Restrictions on uncovered short sales in shares
A natural or legal person may enter into a short sale of a share admitted to trading on a trading venue only where one of the following conditions is fulfilled:
the natural or legal person has borrowed the share or has made alternative provisions resulting in a similar legal effect;
the natural or legal person has entered into an agreement to borrow the share or has another absolutely enforceable claim under contract or property law to be transferred ownership of a corresponding number of securities of the same class so that settlement can be effected when it is due;
the natural or legal person has an arrangement with a third party under which that third party has confirmed that the share has been located and has taken measures vis-à-vis third parties necessary for the natural or legal person to have a reasonable expectation that settlement can be effected when it is due.
ESMA shall submit those draft implementing technical standards to the Commission by 31 March 2012.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Article 13
Restrictions on uncovered short sales in sovereign debt
A natural or legal person may enter into a short sale of sovereign debt only where one of the following conditions is fulfilled:
the natural or legal person has borrowed the sovereign debt or has made alternative provisions resulting in a similar legal effect;
the natural or legal person has entered into an agreement to borrow the sovereign debt or has another absolutely enforceable claim under contract or property law to be transferred ownership of a corresponding number of securities of the same class so that settlement can be effected when it is due;
the natural or legal person has an arrangement with a third party under which that third party has confirmed that the sovereign debt has been located or otherwise has a reasonable expectation that settlement can be effected when it is due.
A suspension shall be valid for an initial period not exceeding 6 months from the date of its publication on the website of the relevant competent authority. The suspension may be renewed for periods not exceeding 6 months if the grounds for the suspension continue to apply. If the suspension is not renewed by the end of the initial period or of any subsequent renewal period it shall automatically expire.
ESMA shall, within 24 hours of notification by the relevant competent authority, issue an opinion based on paragraph 4 on the notified suspension or renewal of suspension. The opinion shall be published on ESMA’s website.
The parameters and methods for Member States to calculate the threshold shall be set in such a way that where it is reached, it represents a significant decline relative to the average level of liquidity for the sovereign debt concerned.
The threshold shall be defined based on objective criteria specific to the relevant sovereign debt market, including the total amount of outstanding issued sovereign debt for each sovereign issuer.
ESMA shall submit those draft implementing technical standards to the Commission by 31 March 2012.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Article 14
Restrictions on uncovered sovereign credit default swaps
A competent authority may temporarily suspend restrictions referred to in paragraph 1, where it has objective grounds for believing that its sovereign debt market is not functioning properly and that such restrictions might have a negative impact on the sovereign credit default swap market, especially by increasing the cost of borrowing for sovereign issuers or affecting the sovereign issuers’ ability to issue new debt. Those grounds shall be based on the following indicators:
a high or rising interest rate on the sovereign debt;
a widening of interest rate spreads on the sovereign debt compared to the sovereign debt of other sovereign issuers;
a widening of the sovereign credit default swap spreads compared to the own curve and compared to other sovereign issuers;
the timeliness of the return of the price of the sovereign debt to its original equilibrium after a large trade;
the amounts of sovereign debt that can be traded.
The competent authority may also use indicators other than those set out in points (a) to (e) of the first subparagraph.
Before suspending restrictions under this Article, the relevant competent authority shall notify ESMA and the other competent authorities of the proposed suspension and the grounds on which it is based.
A suspension shall be valid for an initial period not exceeding 12 months from the date of its publication on the website of the relevant competent authority. The suspension may be renewed for periods not exceeding 6 months if the grounds for the suspension continue to apply. If the suspension is not renewed by the end of the initial period or of any subsequent renewal period, it shall automatically expire.
ESMA shall, within 24 hours of the notification by the relevant competent authority, issue an opinion on the intended suspension or on the renewal of that suspension, irrespective of whether the competent authority has based the suspension on the indicators set out in points (a) to (e) of the first subparagraph or on other indicators. Where the intended suspension or renewal of a suspension is based on the second subparagraph, that opinion shall also include an assessment of the indicators used by the competent authority. The opinion shall be published on ESMA’s website.
▼M1 —————
CHAPTER IV
EXEMPTIONS
Article 16
Exemption where the principal trading venue is in a third country
The relevant competent authority shall notify ESMA of any such shares identified as having their principal trading venue located in a third country.
Every 2 years ESMA shall publish the list of shares for which the principal trading venue is located in a third country. The list shall be effective for a 2-year period.
ESMA shall submit those draft regulatory technical standards to the Commission by 31 March 2012.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
In order to ensure uniform conditions of application of paragraphs 1 and 2 ESMA shall develop draft implementing technical standards to determine:
the date on which and period in respect of which any calculation determining the principal trading venue for a share is to be made;
the date by which the relevant competent authority shall notify ESMA of those shares for which the principal trading venue is in a third country;
the date from which the list is to be effective following publication by ESMA.
ESMA shall submit those draft implementing technical standards to the Commission by 31 March 2012.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
Article 17
Exemption for market making activities and primary market operations
The legal and supervisory framework of a third country may be considered equivalent where that third country’s:
markets are subject to authorisation and to effective supervision and enforcement on an ongoing basis;
markets have clear and transparent rules regarding admission of securities to trading so that such securities are capable of being traded in a fair, orderly and efficient manner, and are freely negotiable;
security issuers are subject to periodic and ongoing information requirements ensuring a high level of investor protection; and
market transparency and integrity are ensured by preventing market abuse in the form of insider dealing and market manipulation.
CHAPTER V
POWERS OF INTERVENTION OF COMPETENT AUTHORITIES AND OF ESMA
SECTION 1
Powers of competent authorities
Article 18
Notification and disclosure in exceptional circumstances
Subject to Article 22, a competent authority may require natural or legal persons who have net short positions in relation to a specific financial instrument or class of financial instruments to notify it or to disclose to the public details of the position where the position reaches or falls below a notification threshold fixed by the competent authority and where:
there are adverse events or developments which constitute a serious threat to financial stability or to market confidence in the Member State concerned or in one or more other Member States; and
the measure is necessary to address the threat and will not have a detrimental effect on the efficiency of financial markets which is disproportionate to its benefits.
Article 19
Notification by lenders in exceptional circumstances
Subject to Article 22, a competent authority may take the measure referred to in paragraph 2 of this Article where:
there are adverse events or developments which constitute a serious threat to financial stability or to market confidence in the Member State concerned or in one or more other Member States; and
the measure is necessary to address the threat and will not have a detrimental effect on the efficiency of financial markets which is disproportionate to its benefits.
Article 20
Restrictions on short selling and similar transactions in exceptional circumstances
Subject to Article 22, a competent authority may take one or more of the measures referred to in paragraph 2 of this Article where:
there are adverse events or developments which constitute a serious threat to financial stability or to market confidence in the Member State concerned or in one or more other Member States; and
the measure is necessary to address the threat and will not have a detrimental effect on the efficiency of financial markets which is disproportionate to its benefits.
A competent authority may prohibit or impose conditions relating to natural or legal persons entering into:
a short sale; or
a transaction other than a short sale which creates, or relates to, a financial instrument and the effect or one of the effects of that transaction is to confer a financial advantage on the natural or legal person in the event of a decrease in the price or value of another financial instrument.
Article 21
Restrictions on sovereign credit default swap transactions in exceptional circumstances
Subject to Article 22, a competent authority may restrict the ability of natural or legal persons to enter into sovereign credit default swap transactions or may limit the value of sovereign credit default swap positions that those persons are permitted to enter into where:
there are adverse events or developments which constitute a serious threat to financial stability or to market confidence in the Member State concerned or in one or more other Member States; and
the measure is necessary to address the threat and will not have a detrimental effect on the efficiency of financial markets which is disproportionate to its benefits.
Article 22
Measures by other competent authorities
Without prejudice to Article 26, a competent authority in relation to a financial instrument for which it is not the relevant competent authority may impose or renew a measure under Article 18, 19, 20 or 21 only with the consent of the relevant competent authority.
Article 23
Power to restrict short selling of financial instruments temporarily in the case of a significant fall in price
Where the competent authority is satisfied under the first subparagraph that it is appropriate to do so, it shall in the case of a share or a debt instrument, prohibit or restrict natural and legal persons from entering into a short sale on that trading venue or in the case of another type of financial instrument, limit transactions in that financial instrument on that trading venue in order to prevent a disorderly decline in the price of the financial instrument.
If a competent authority disagrees with the action taken by another competent authority on a financial instrument traded on different venues regulated by different competent authorities, ESMA may assist those authorities in reaching an agreement in accordance with Article 19 of Regulation (EU) No 1095/2010.
The conciliation shall be completed before midnight at the end of the same trading day. If the competent authorities concerned fail to reach an agreement within the conciliation phase, ESMA may take a decision in accordance with Article 19(3) of Regulation (EU) No 1095/2010. The decision shall be taken before the opening of the next trading day.
The Commission shall be empowered to adopt delegated acts in accordance with Article 42 modifying the thresholds referred to in paragraph 5 of this Article, taking into account the developments in financial markets.
ESMA shall submit those draft regulatory technical standards to the Commission by 31 March 2012.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
Article 24
Period of restrictions
A measure imposed under Article 18, 19, 20 or 21 shall be valid for an initial period not exceeding 3 months from the date of publication of the notice referred to in Article 25.
The measure may be renewed for further periods not exceeding 3 months if the grounds for taking the measure continue to apply. If the measure is not renewed by the end of such a 3-month period, it shall automatically expire.
Article 25
Notice of restrictions
The notice shall specify at least details of:
the measures imposed including the instruments and classes of transactions to which they apply and their duration;
the reasons why the competent authority believes it is necessary to impose the measures including the evidence supporting those reasons.
Article 26
Notification to ESMA and other competent authorities
SECTION 2
Powers of ESMA
Article 27
Coordination by ESMA
Article 28
ESMA intervention powers in exceptional circumstances
In accordance with Article 9(5) of Regulation (EU) No 1095/2010, ESMA shall, subject to paragraph 2 of this Article, either:
require natural or legal persons who have net short positions in relation to a specific financial instrument or class of financial instruments to notify a competent authority or to disclose to the public details of any such position; or
prohibit or impose conditions on, the entry by natural or legal persons into a short sale or a transaction which creates, or relates to, a financial instrument other than financial instruments referred to in point (c) of Article 1(1) where the effect or one of the effects of the transaction is to confer a financial advantage on such person in the event of a decrease in the price or value of another financial instrument.
A measure may apply in particular circumstances, or be subject to exceptions specified by ESMA. Exceptions may in particular be specified to apply to market-making activities and primary market activities.
ESMA shall take a decision under paragraph 1 only if:
the measures listed in points (a) and (b) of paragraph 1 address a threat to the orderly functioning and integrity of financial markets or to the stability of the whole or part of the financial system in the Union and there are cross-border implications; and
no competent authority has taken measures to address the threat or one or more of the competent authorities have taken measures that do not adequately address the threat.
Where taking measures referred to in paragraph 1 ESMA shall take into account the extent to which the measure:
significantly addresses the threat to the orderly functioning and integrity of financial markets or to the stability of the whole or part of the financial system in the Union or significantly improves the ability of the competent authorities to monitor the threat;
does not create a risk of regulatory arbitrage;
does not have a detrimental effect on the efficiency of financial markets, including by reducing liquidity in those markets or creating uncertainty for market participants, that is disproportionate to the benefits of the measure.
Where one or more competent authorities have taken a measure under Article 18, 19, 20 or 21, ESMA may take any of the measures referred to in paragraph 1 of this Article without issuing the opinion provided for in Article 27.
ESMA shall publish on its website notice of any decision to impose or renew any measure referred to in paragraph 1. The notice shall at least specify:
the measures imposed including the instruments and classes of transactions to which they apply, and their duration; and
the reasons why ESMA is of the opinion that it is necessary to impose the measures including the evidence supporting those reasons.
Article 29
ESMA’s powers in emergency situations relating to sovereign debt
In the case of an emergency situation relating to sovereign debt or sovereign credit default swaps, Articles 18 and 38 of Regulation (EU) No 1095/2010 shall apply.
Article 30
Further specification of adverse events or developments
The Commission shall be empowered to adopt delegated acts in accordance with Article 42 specifying criteria and factors to be taken into account by the competent authorities and by ESMA in determining in which cases the adverse events or developments referred to in Articles 18 to 21 and Article 27 and the threats referred to in point (a) of Article 28(2) arise.
Article 31
Inquiries by ESMA
ESMA may, on the request of one or more of the competent authorities, the European Parliament, the Council or the Commission or on its own initiative conduct an inquiry into a particular issue or practice relating to short selling or relating to the use of credit default swaps to assess whether that issue or practice poses any potential threat to financial stability or market confidence in the Union.
ESMA shall publish a report setting out its findings and any recommendations relating to the issue or practice within 3 months as from the end of any such inquiry.
CHAPTER VI
ROLE OF COMPETENT AUTHORITIES
Article 32
Competent authorities
Each Member State shall designate one or more of the competent authorities for the purpose of this Regulation.
Where a Member State designates more than one competent authority, it shall clearly determine their respective roles and it shall designate the authority to be responsible for coordinating the cooperation and the exchange of information with the Commission, ESMA and the competent authorities of the other Member States.
Member States shall inform the Commission, ESMA and the competent authorities of the other Member States of those designations.
Article 33
Powers of competent authorities
In order to fulfil their duties under this Regulation, the competent authorities shall have all the supervisory and investigatory powers that are necessary for the exercise of their functions. They shall exercise their powers in any of the following ways:
directly;
in collaboration with other authorities;
by application to the competent judicial authorities.
In order to fulfil their duties under this Regulation, the competent authorities shall, in accordance with national law, have the power:
to gain access to any document in any form and to receive or take a copy thereof;
to require information from any natural or legal person and if necessary to summon and question a natural or legal person with a view to obtaining information;
to carry out on-site inspections with or without prior announcement;
to require existing telephone and existing data traffic records;
to require the cessation of any practice that is contrary to the provisions in this Regulation;
to require the freezing and/or the sequestration of assets.
The competent authorities shall, without prejudice to points (a) and (b) of paragraph 2, have the power in individual cases to require a natural or legal person entering into a credit default swap transaction to provide:
an explanation about the purpose of the transaction and whether it is for the purposes of hedging against a risk or otherwise; and
information verifying the underlying risk where the transaction is for hedging purposes.
Article 34
Professional secrecy
Article 35
Obligation to cooperate
The competent authorities shall cooperate where necessary or expedient for the purposes of this Regulation. In particular, the competent authorities shall, without undue delay, supply each other with information which is relevant for the purposes of carrying out their duties under this Regulation.
Article 36
Cooperation with ESMA
The competent authorities shall cooperate with ESMA for the purposes of this Regulation in accordance with Regulation (EU) No 1095/2010.
The competent authorities shall provide, without delay, ESMA with all the information necessary to carry out its duties in accordance with Regulation (EU) No 1095/2010.
Article 37
Cooperation in case of request for on-site inspections or investigations
The requesting competent authority shall inform ESMA of any request referred to in the first subparagraph. In case of an investigation or an inspection with cross-border effects, ESMA may and if requested shall coordinate the investigation or inspection.
Where a competent authority receives a request from a competent authority of another Member State to carry out an on-site inspection or an investigation, it may:
carry out the on-site inspection or investigation itself;
allow the competent authority which submitted the request to participate in an on-site inspection or investigation;
allow the competent authority which submitted the request to carry out the on-site inspection or investigation itself;
appoint auditors or experts to carry out the on-site inspection or investigation;
share specific tasks relating to supervisory activities with the other competent authorities.
Article 38
Cooperation with third countries
A competent authority shall inform ESMA and the competent authorities of the other Member States where it proposes to enter into such an arrangement.
ESMA shall also coordinate the exchange between the competent authorities of information obtained from supervisory authorities of third countries that may be relevant to the taking of measures under Chapter V.
Article 39
Transfer and retention of personal data
With regard to transfer of personal data between Member States or between Member States and a third country, Member States shall apply Directive 95/46/EC. With regard to transfer of personal data by ESMA to Member States or to a third country, ESMA shall comply with Regulation (EC) No 45/2001.
Personal data referred to in the first paragraph shall be retained for a maximum period of 5 years.
Article 40
Disclosure of information to third countries
A competent authority may transfer to a supervisory authority of a third country data and the analysis of data where the conditions laid down in Article 25 or 26 of Directive 95/46/EC are fulfilled but such transfer shall be made only on a case-by-case basis. The competent authority shall be satisfied that the transfer is necessary for the purposes of this Regulation. Any such transfer shall be made under agreement that the third country shall not transfer the data to the supervisory authority of another third country without the express written authorisation of the competent authority.
A competent authority shall disclose information which is confidential pursuant to Article 34 and which is received from a competent authority of another Member State to a supervisory authority of a third country only where the competent authority has obtained the express agreement of the competent authority which transmitted the information and, where applicable, the information is disclosed solely for the purposes for which that competent authority gave its agreement.
Article 41
Penalties
Member States shall establish rules on penalties and administrative measures, applicable to infringements of this Regulation and shall take all measures necessary to ensure that they are implemented. Those penalties and administrative measures shall be effective, proportionate and dissuasive.
In accordance with Regulation (EU) No 1095/2010, ESMA may adopt guidelines to ensure a consistent approach is taken concerning the penalties and administrative measures to be established by Members States.
Member States shall notify the Commission and ESMA of the provisions referred to in the first and second subparagraphs by 1 July 2012 and shall notify them without delay of any subsequent amendment affecting those provisions.
ESMA shall publish on its website and update regularly a list of existing penalties and administrative measures applicable in each Member State.
Member States shall provide ESMA annually with aggregate information regarding the penalties and administrative measures imposed. If a competent authority discloses to the public the fact that a penalty or an administrative measure has been imposed, it shall, contemporaneously, notify ESMA thereof.
CHAPTER VII
DELEGATED ACTS
Article 42
Exercise of the delegation
Article 43
Deadline for the adoption of delegated acts
The Commission shall adopt the delegated acts under Article 2(2), Article 3(7), Article 4(2), Article 5(4), Article 6(4), Article 7(3), Article 17(2), Article 23(5) and Article 30 by 31 March 2012.
The Commission may extend the deadline referred to in the first paragraph by 6 months.
CHAPTER VIII
IMPLEMENTING ACTS
Article 44
Committee procedure
CHAPTER IX
TRANSITIONAL AND FINAL PROVISIONS
Article 45
Review and report
By 30 June 2013, the Commission shall, in light of discussions with the competent authorities and ESMA, report to the European Parliament and the Council on:
the appropriateness of the notification and disclosure thresholds under Articles 5, 6, 7 and 8;
the impact of the individual disclosure requirements under Article 6, in particular with regard to the efficiency and volatility of financial markets;
the appropriateness of direct, centralised reporting to ESMA;
the operation of the restrictions and requirements in Chapters II and III;
the appropriateness of the restrictions on the uncovered sovereign credit default swaps and the appropriateness of any other restrictions or conditions on short selling or credit default swaps.
Article 46
Transitional provision
Article 47
Staff and resources of ESMA
By 31 December 2012, ESMA shall assess its staffing and resources needs arising from the assumption of its powers and duties under this Regulation and submit a report to the European Parliament, the Council and the Commission.
Article 48
Entry into force
This Regulation shall enter into force on the day following its publication in the Official Journal of the European Union.
It shall apply from 1 November 2012.
However, Article 2(2), Article 3(7), Article 4(2), Article 7(3), Article 9(5), Article 11(3) and (4), Article 12(2), Article 13(4) and (5), Article 16(3) and (4), Article 17(2), Article 23(5), (7) and (8), and Articles 30, 42, 43 and 44 shall apply from 25 March 2012.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
( 1 ) OJ L 177, 30.6.2006, p. 1.
( 2 ) Commission Regulation (EC) No 1287/2006 of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards record-keeping obligations for investment firms, transaction reporting, market transparency, admission of financial instruments to trading, and defined terms for the purposes of that Directive (OJ L 241, 2.9.2006, p. 1).
( 3 ) OJ L 142, 30.4.2004, p. 12.
( 4 ) OJ L 96, 12.4.2003, p. 16.
( 5 ) OJ L 390, 31.12.2004, p. 38.
( 6 ) OJ L 336, 23.12.2003, p. 33.
( 7 ) OJ L 191, 13.7.2001, p. 45.