ESMA has published its final advice on technical measures under the Regulation on Short Selling and Credit Default Swaps (CDS). The advice covers:

  • when a natural or legal person is considered to own a financial instrument for the purposes of the definition of short sale;
  • calculations of net short positions in shares or sovereign debt, including in the group or fund management context;
  • cases in which a CDS transaction is considered to be hedging against a default risk or the risk of a decline in the value of the sovereign debt and the method of calculation of an uncovered position in a CDS;
  • the initial and incremental levels of notification thresholds for reporting net short positions in sovereign debt;
  • the parameters and methods for calculating the threshold of liquidity on sovereign debt for suspending restrictions on short sales of sovereign debt;
  • what constitutes a “significant fall in value” for various financial instruments and the method of calculation of falls; and
  • the criteria and factors to help regulators decide when adverse events or developments arise.

(Source: ESMA Advises on Short Selling Standards)