ESMA has published today its final advice on possible delegated acts concerning the Short-Selling Regulation.
ESMA's advice specifies the definition of when a natural or legal person is considered to own a financial instrument for the purposes of the definition of short sale (Article 2(2) of theRegulation).
Section II of the advice relates to the net position in shares or sovereign debt covering the concept of holding a position, the case when a person has a net short position and the method of calculation of such a position including when different entities in a group have long or short positions or for fund management activities related to separate funds (Article 3(7)).
Section III sets out the advice on the cases in which a credit default swap (CDS) transaction is considered to be hedging against a default risk or the risk of a decline of the value of the sovereign debt and the method of calculation of an uncovered position in a CDS (Article 4(2)).
Section IV defines the initial and incremental levels of the notification thresholds to apply for the reporting of net short positions in sovereign debt (Article 7(3)).
Section V specifies the parameters and methods for calculating the threshold of liquidity on sovereign debt for suspending restrictions on short sales of sovereign debt (Article 13(4)).
Section VI sets out ESMA’s proposal of advice on what constitutes a significant fall in value for various financial instruments and also specifies, in the form of a draft RTS, the method of calculation of such falls (Article 23(7) and (8)). The full text of the draft RTS is presented in Annex IV.
Section VII also specifies the criteria and factors to be taken into account by competent authorities and ESMA in determining when adverse events or developments arise (Article 30).