The EU Regulation No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (the “Regulation”) and the subsidiary legislation made under it take effect in all 27 countries of the EU on 1 November 2012 and will replace all existing rules on short selling activities in EU countries.
With respect to almost all securities listed on exchanges in the EU, the Regulation will require disclosure, both to the regulator of the relevant EU country on whose market(s) the particular securities are listed and (in certain circumstances) to the public, of any net short positions in excess of 0.2 % held by any persons, anywhere in the world. With regard to short positions in EU sovereign debt or credit default swaps (“CDS”) referable to EU sovereign debt, a private disclosure will also be required to be made to the regulator of the EU country whose debt forms the subject of the CDS, although for CDS there is no requirement for disclosure to the public.
The Regulation also introduces an EU “locate rule” which requires that persons short selling EU securities or EU sovereign debt must have covered their short position(s) and, unless a very narrow exemption is applicable (see below), CDS positions referable to EU sovereign debt must also be covered. Existing uncovered positions which cannot be covered before 1 November 2012 may need to be unwound to be in compliance with the Regulation.
Click here to read our article that appeared in The Hedge Fund Journal discussing the requirements of the new rules.