On June 3, 2013, the European Securities and Markets Authority (ESMA) published its Technical Advice evaluating the impact (Technical Advice) of the Regulations on short selling and certain aspects of credit default swaps (Regulation) on the European financial markets, in application since November 1, 2012 (a Compliance Table in relation to its Guidelines on Exemption under the Regulation was published by ESMA on June 19, 2013). The Regulation is intended to lay down a common regulatory framework with regard to the requirements and powers relating to short selling and sovereign credit default swaps and ensures greater coordination and consistency between Member States. It also heavily aims to enhance transparency, reduce certain risks associated with short selling and un-covered CDS, and ensure a common regulatory approach across Member States.
In order to inform and evidence its Technical Advice to the extent possible, ESMA has conducted a quantitative analysis and, for more qualitative inputs, organized a public consultation in the form of a "call for evidence" and a survey among national competent authorities.
As such, its Technical Advice first focuses discussion on the current reporting and disclosure thresholds being correct, but suggestions on technical improvements on the method for calculating net short positions in shares and the information provided to competent authorities and the public. Second, ESMA advises on further clarifications for the exemption of market making activities. Last, but not least, there is discussion on reconsidering provisions for temporary bans when there are significant price falls. In turn, the European Commission is under an obligation to report to the European Parliament and the Council on the appropriateness, impact and operation of the Regulation‘s requirements and restrictions.