Brussel wil short selling gaan reguleren (en)
On 18th October, the Presidency together with the European Parliament and the European Commission pre-agreed the text of the regulation on short selling.
The result of the negotiations is very balanced and takes into account concerns that have been raised, as well as and goals of institutions participating in the negotiation process. Following the adoption of the so-called ‘six-pack and the reaching of an agreement in the Council of the European Union on the European Market Infrastructure Regulation (EMIR), the agreement reached on 18th October 2011 is further evidence of the fact that European institutions are able to cooperate with each other in developing new rules to strengthen the stability of financial markets.
The agreed draft regulation allows for the adoption of a common regulatory framework for short-sellingtransactions. So far, the measures taken by individual Member States have differed, which contributed to the adoption of heterogeneous solutions. As a result, this led to a reduction in the effectiveness of the measures adopted by Member States, in particular through the creation of the possibility of regulatory arbitrage. Therefore, the main purpose of this regulation is to prevent the current situation by establishing a common framework throughout the European Union.
The draft regulation introduces requirements common to all Member States for transparency in short-sellingtransactions. First of all, the empowerment in emergencies that could pose a serious threat to financial stability has been harmonised.
Representing the Council of the European Union, Deputy Minister of Finance Wieslaw Szczuka, stressed the role of the joint agreements, which in his opinion can be described as a ‘Polish trademark’. Minister Szczuka also stressed that short selling is not something that is wrong in principle. In particular, it is well known that short selling plays an important role in ensuring the proper functioning of financial markets, primarily by increasing liquidity in the market and the rational pricing of financial instruments. At the same time, adopting the regulation on short selling will allow for the risks of abuse of uncovered short selling to be mitigated.
At the start of negotiations, the position of individual institutions on the prohibition on uncovered credit default swaps differed significantly. The Council of the European Unionand the European Commission were opposed to the imposition of restrictions on such transactions. By contrast, the European Parliament called for banning this type of transaction. Today's agreement is a compromise amongstall institutions involved in the negotiation process.
On one hand, according to the new regulation, uncovered sovereign CDS transactions will be strictly limited. On the other hand, the agreement ensures an adequate level of flexibility for supervisory bodies in Member States, giving them the power to suspend the ban on uncovered credit default swaps, thus allowing the negative effects of the ban to be counteracted. In addition, the agreement contains exemptions from the ban for practices such as proxy hedging and for primary dealers and market makers. First of all, it should be stressed that the compromise is well-balanced and coherent in character.
The preliminary agreement was reached after very intensive negotiations conductedby the Polish Presidencyfrom the start of July.It should be noted that the agreed text of the regulation requires official confirmation from the European Parliament and the Council of the European Union. In the event the Committee of Permanent Representatives of the Council of the European Union approves the agreement, it will enable a European Parliament vote on a draft regulation at a plenary session.