ESMA Report on Impact of Short-Selling Regulation

The European Securities and Markets Authority ("ESMA") presented technical advice on the Evaluation of Regulation 236/2012 to the European Parliament and the Council on Short Selling and Certain Aspects of Credit Default Swaps in compliance with its reporting obligation on the appropriateness, impact and operation of the Regulation's requirements and restrictions.

The report indicated that the short-selling regulation increased market transparency, reduced risks of fails and led to a decline in liquidity, a decrease in bid-ask spreads, and a decline in the speed of price discovery.

Among the topics covered in the report were:

• Section II: Observable effects of the Regulation
• Section III: Transparency and reporting requirements
• Section IV: Restrictions on uncovered short selling and sovereign debt
• Section V: Settlement discipline including buy-in procedures
• Section VI: Restrictions on uncovered sovereign CDS transactions
• Section VII: Exemptions - list of exempted shares - and separation between EU and non-EU shares ("negative-list") by competent authorities
• Section VIII: Exemption for market makers
• Section IX: Intervention powers and emergency measures
• Section IX - II: On the appropriateness of thresholds for significant fall in price

See: Final Report; Press Release.