Short selling of securities

 

SUMMARY OF:

Regulation (EU) No 236/2012 on short selling and certain aspects of credit default swaps

WHAT IS THE AIM OF THE REGULATION?

KEY POINTS

The regulation:

Implementing and delegated acts

COVID-19 pandemic — ESMA decisions

FROM WHEN DOES THE REGULATION APPLY?

It has applied since 1 November 2012.

BACKGROUND

In times of financial instability, certain financial transactions such as short selling and CDS bear the risk of aggravating any downward spiral in the prices of shares, especially in financial institutions, threatening their viability and creating risks to the whole financial system. Such instability in the financial markets can spill over into the real economy.

For more information, see:

KEY TERMS

Short selling: a transaction in which a financial institution sells a financial product it has borrowed, with the aim of buying it back later. The institution hopes that in the meantime the price of the product will have fallen, so it has to pay less than the price it obtained from the sale.
Credit default swaps (CDS): highly risky, unregulated derivatives.
Exceptional circumstances: in the context of this regulation:
Naked short selling: perceived as riskier than normal short selling — when the seller has not even borrowed the financial product in the first place.

MAIN 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 86, 24.3.2012, pp. 1-24)

Successive amendments to Regulation (EU) No 236/2012 have been incorporated in the original text. This consolidated version is of documentary value only.

RELATED DOCUMENTS

European Securities and Markets Authority Decision (EU) 2020/525 of 16 March 2020 to require natural or legal persons who have net short positions to temporarily lower the notification thresholds of net short positions in relation to the issued shares capital of companies whose shares are admitted to trading on a regulated market above a certain threshold to notify the competent authorties in accordance with point (a) of Article 28(1) of Regulation (EU) No 236/2012 of the European Parliament and of the Council (OJ L 116, 15.4.2020, pp. 5-13)

Regulation (EU) 2016/1033 of the European Parliament and of the Council of 23 June 2016 amending Regulation (EU) No 600/2014 on markets in financial instruments, Regulation (EU) No 596/2014 on market abuse and Regulation (EU) No 909/2014 on improving securities settlement in the European Union and on central securities depositories (OJ L 175, 30.6.2016, pp. 1-7)

Commission Delegated Regulation (EU) No 918/2012 of 5 July 2012 supplementing Regulation (EU) No 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps with regard to definitions, the calculation of net short positions, covered sovereign credit default swaps, notification thresholds, liquidity thresholds for suspending restrictions, significant falls in the value of financial instruments and adverse events (OJ L 274, 9.10.2012, pp. 1-15)

See consolidated version.

Commission Delegated Regulation (EU) No 919/2012 of 5 July 2012 supplementing Regulation (EU) No 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps with regard to regulatory technical standards for the method of calculation of the fall in value for liquid shares and other financial instruments (OJ L 274, 9.10.2012, pp. 16-17)

Commission Implementing Regulation (EU) No 827/2012 of 29 June 2012 laying down implementing technical standards with regard to the means for public disclosure of net position in shares, the format of the information to be provided to the European Securities and Markets Authority in relation to net short positions, the types of agreements, arrangements and measures to adequately ensure that shares or sovereign debt instruments are available for settlement and the dates and period for the determination of the principal venue for a share according to Regulation (EU) No 236/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps (OJ L 251, 18.9.2012, pp. 11-18)

Commission Delegated Regulation (EU) No 826/2012 of 29 June 2012 supplementing Regulation (EU) No 236/2012 of the European Parliament and of the Council with regard to regulatory technical standards on notification and disclosure requirements with regard to net short positions, the details of the information to be provided to the European Securities and Markets Authority in relation to net short positions and the method for calculating turnover to determine exempted shares (OJ L 251, 18.9.2012, pp. 1-10)

last update 18.12.2020