MFA and AIMA Submit Comments to ESMA on Consultation Paper concerning Short Selling Regulation

September 04, 2017

From: Stuart J. Kaswell (MFA) and Jiri Król (AIMA)

To:

European Securities and Markets Authority (ESMA) 

On September 4, MFA and AIMA jointly filed a comment letter with the European Securities and Markets Authority (ESMA) regarding the ‘Consultation Paper on the evaluation of certain elements of the Short Selling Regulation.’

In the letter, the Associations set proposals for how ‘Regulation (EU) No.236/2012 on short selling and certain aspects of credit default swaps’ (the SSR) could be amended to improve its functioning for both national competent authorities (NCAs) and market participants.

The Associations’ key points are:

  • Establish a centralized source of in-scope instruments and issued share capital information – The letter explains that a centralized source of both issued share capital and scope information at EU level, combined with an obligation upon issuers to provide issued share capital figures, would improve net short position notification quality for NCAs under the SSR and eliminate a huge source of compliance cost and inefficiency for market participants.
  • Introduce a centralized reporting mechanism – We recommend the introduction of a centralized EU SSR notification and disclosure mechanism, which would benefit NCAs through enhanced data quality and comparability, reduced erroneous calculations and – if errors in issued share capital data provided by issuers is detected – the efficient centralized cleaning of data.
  • Extend the notification and disclosure timing to T+2 – The letter recommends an extension of the deadline by 24 hours to 15:30 T+2 to maximize the accuracy and timeliness of notifications.
  • Remove the 0.1% incremental thresholds – The letter suggests the elimination of the 0.1% incremental thresholds for additional notifications beyond the main notification and publication thresholds, as these additional notifications do not provide a commensurate supervisory benefit to NCAs when compared with the significant costs for participants.
  • Allow objective assessments of dual-listed instruments with a primary listing outside the EU – We suggest that a centralized list of in-scope instruments would improve the scope issues of dual-listed instruments, however if this is not introduced we recommend that participants themselves decide and document – according to robust objective criteria – those shares with a primary listing outside the EU, thus falling outside of the scope of SSR.
  • Permit duration adjustments for bonds and derivatives – We support Option B within the consultation to permit the duration adjusted method for both cash and derivative instruments. This would yield results which more closely represent the economic exposure of relevant positions as compared to the results calculated in accordance with the Option A delta approach.

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