European Scrutiny Committee Contents

2 Financial services



European Central Bank Opinion on a draft Regulation on short selling and certain aspects of credit default swaps

Legal base
Deposited in Parliament11 March 2011
DepartmentHM Treasury
Basis of considerationEM of 30 March 2011
Previous Committee ReportNone
To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionFor debate in European Committee B, together with a draft Regulation on short selling and certain aspects of credit default swaps already recommended for debate


2.1 In September 2010 the Commission proposed a Regulation to introduce a number of permanent measures, as well as some temporary ones to be used in adverse circumstances, in relation to short selling of financial instruments. We have recommended that draft Regulation for debate in European Committee B.[4]

2.2 In October 2010 the Council requested a formal Opinion on the proposal from the European Central Bank (ECB).

The document

2.3 This Opinion is the ECB's response. In it the Bank supports the objective of the proposals and recommends a total of 11 amendments. The amendments cover:

  • recital 6 — adding "an officially appointed mechanism" for the disclosure of data on short selling by the European Securities and Markets Authority (ESMA);
  • new recital 4a — citing the need for use of consistent reporting formats for reporting and public disclosure;
  • new recital 15a — citing the need for real-time information sharing between competent authorities and the ESMA;
  • recital 27 — extending the scope of consultation between the ESMA and the European Systemic Risks Board (ESRB);
  • Article 2.1(i) — making the definition of "sovereign debt issuer" consistent with existing EU secondary legislation;
  • Article 9 — making reporting and disclosure standards used in ESRB consultation consistent;
  • Article 11 — setting out modalities of information sharing in real time between competent authorities and the ESMA;
  • new Article 15.12 — provision for additional regulatory technical standards to avoid abuses of the market maker exemptions;
  • new Article 15.13 — adoption of uniform technical standards to provide for consistent application of the stabilisation exemption in Article 15.4;
  • new Article 23.2a — requiring the ESMA to consult the ESRB before taking any measure under Article 23.1, to allow incorporation of a macro-prudential perspective; and
  • Article 24.4 — requiring the ESMA to allow the ESRB 24 hours to respond to a consultation under Article 24.4 and to allow for incorporation of the macro-prudential perspective.

The Government's view

2.4 The Financial Secretary to the Treasury (Mr Mark Hoban) says that:

  • the ECB's Opinion requires no action and therefore does not have any direct policy implications for the UK;
  • the ECB's proposed amendments have been made in relation to the original draft Regulation published by the Commission in September 2010; and
  • in the intervening period a number of changes have been made to the draft proposal and several of the ECB's suggestions are now incorporated in the text.

2.5 The Minister then sets out the Government's views on the individual amendments proposed by the ECB, saying that:

in relation to Recital 6, new Recital 14a, Recital 15a, Recital 27, Article 9, new Article 23.2(a) and Article 24.4

  • "the Government supports improved cooperation and information exchange between national supervisory authorities, the European Supervisory Authorities and the ESRB";
  • in discussions in the Council Member States decided that there was no need to be prescriptive in the methods of disclosure to be used by the ESMA — Article 9 of the latest presidency text requires competent authorities to publish information relating to short positions on a central website and to communicate the address of the site to the ESMA which must, in turn post a link to all such sites on its own website;
  • "the Government does not agree that there is a need for further detail in the draft Regulation regarding the format of reporting to be used by the ESMA";

in relation to Article 2.1(i)

  • Article 2(1)(i) now has an expanded definition of "sovereign issuer" which meets the ECB's suggestion;

in relation to Article 11

  • the Government supports improved cooperation and information exchange between competent authorities and the ESMA — Article 11 requires competent authorities to share information with ESMA within seven calendar days and the Government expects that there will be further discussion regarding the modalities of information sharing;

in relation to new Articles 15.12 and 15.13

  • the Government does not think that it is necessary to provide for further technical standards in relation to the exemptions set out in Article 15 of the draft Regulation — any abuse of those exemptions can be dealt with under the existing provisions; and

in relation to new Article 23.2(a) and Article 24.4

  • the Government would not support these suggestions as they would limit the ESMA's ability to respond to a crisis with appropriate measures within 12 hours.


2.6 We recommend that this Opinion be debated with the draft Regulation on short selling and certain aspects of credit default swaps, already scheduled for debate in European Committee B.

4   (31956) 13840/10: see HC 428-iv (2010-11), chapter 3 (20 October 2010), HC 428-ix (2010-11), chapter 8 (24 November 2010) and HC 428-xviii (2010-11), chapter 1 (2 March 2011). Back

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