The work that CESR has carried out since September 2008 with regard to the measures adopted by its Members on short selling practices is helpful and it is welcome by FESE. The rationale behind the measures taken by the Competent Authorities is utterly justified as extreme market conditions triggered extreme measures to seek restoring confidence in the markets. However, notwithstanding the laudable intentions, the restrictions imposed by several authorities in the EU have been both discriminatory and ineffective. To avoid that measures apply only to certain venues and to certain financial instruments, it is key that future measures apply consistently across European markets.
With regard to the possibility of flagging short positions, our members agree with CESR that it appears to be inherent imperfections in the data arising from the mechanics of aggregation. Questions about how much value such information adds to other data should also be carefully pondered. Significantly, flagging of short sales would not provide the Competent Authorities with information about short selling activity in OTC markets. This element would considerably add to the unreliability of the picture, given that, according to our latest figures, equity OTC trading is around 40% of European trading.
Concerning the possibility of requiring the reporting of significant short positions, proportionate measures that address the policy concerns should be well justified and applied in a non-discriminatory way to all venues and instruments concerned. In the EU, to avoid disruptions to the Single Market, the same principles must apply in all jurisdictions and regulators must act in close coordination. Private reporting to the Regulator would also represent a valuable tool to gain information on market tensions and would be useful for market manipulation analysis. However, it involves increased implementation costs. There are also concerns with ensuring the completeness and correctness of the reported information.
The FESE response contains other comments concerning CESR’s questions about the proposed two-tier disclosure model, the (public and private) disclosure requirements and how the calculations of the short positions should be done.
FESE Response on CESR Consultation on short selling.pdf
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FESE Response To CESR Proposal For A Pan-European Short Selling Disclosure Regime
Date 09/10/2009