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MiFID review

Short selling

MiFID review

MiFID review

The European Commission’s review of the Markets in Financial Instruments Directive (MiFID) is one of the most important regulatory initiatives that is likely to affect the cross border securities markets.

The Commission published a consultation paper on its review of MiFID in December 2010, to which ICMA has responded on behalf of its members.

2 February 2011 ICMA’s response the Commission’s MIFID Review Consultation

10 March 2011 ICMA and a number of other associations wrote to Commissioner Barnier, expressing support for the principle of broadening investors’ choice. The signatories believe that preserving investors’ freedom to choose where to execute trades is entirely compatible with the goals of ensuring transparency, strong risk management and operational efficiency.

MiFID

The Markets in Financial Instruments Directive (2004/39/EC) (‘MiFID’) is the successor to the Investment Services Directive. The objective of MiFID is to make it easier for investment firms to undertake investment business across the EU, whether on a cross-border basis or through branches. MiFID was implemented on 1 November 2007.

MiFID Connect

MIFID Connect is a joint project involving 11 trade associations including ICMA which is designed to support member firms and simplify the UK implementation of the Markets in Financial Instruments Directive (MiFID).

Click here to go to the MiFID Connect website.

FSA letters on waivers

8 March 2007
Managing waivers in the transition to NEWCOB’

8 March 2007
Waivers letter enclosure re NEWCOB

Short selling

There has been increasing regulatory attention to short selling since the collapse of Lehman Brothers.

10 March 2012
AFME, ICMA, ISLA and ISDA joint input for ESMA Consultation Paper on possible Delegated Acts concerning the regulation on short selling and certain aspects of credit default swaps ((EU) No XX/2012)

13 February 2012
AFME, ICMA, ISLA and ISDA joint input for ESMA Consultation Paper on draft technical standards on the Regulation (EU) xxxx/2012 of the European Parliament and of the Council on short selling and certain aspects of credit default swaps

13 January 2011
On 18 May 2010, Germany announced a ban on short-selling transactions in certain shares, naked short selling transactions in debt securities issued by EU Member States whose legal currency is the euro as well as Credit Default Swaps (CDS) to the extent that at least one reference liability is a liability of a euro zone country and to the extent that they do not serve as hedging instruments against credit default risks (naked CDS). This ban was subsequently revoked with effect from 27 July 2010 due to the entering into force of the Act on the Prevention of Improper Securities and Derivatives Transactions (Gesetz zur Vorbeugung gegen missbräuchliche Wertpapier- und Derivategeschäfte) on 27 July 2010 which contains prohibitory regulations in this regard. Therefore, the General Decrees no longer need to be upheld. However, the FAQs that the Bafin published pursuant to the ban that came into effect on 18 May 2010 are still in effect and can be accessed here.

The European Commission has also been considering short selling. In June, the European Commission published a consultation paper to which ICMA submitted two responses:

(1) Secondary Markets response
(2) ERC response

The European Commission subsequently published a draft Short Selling Regulation and Regulatory Impact Assessment in September. This draft is currently being considered by the European Parliament and Council.

In this context, the ICMA European Repo Council wrote to Mr. Pascal Canfin, MEP on 13 January 2011 to outline the concerns with the way Article 13 of the proposed Regulation was drafted. Article 13 of the proposed Regulation requires provisions be put in place for the automatic buy-in of securities and imposition of daily payments in the case of failure to deliver securities within the prescribed time period.

*On 4 December 2015, the name of the European Repo Council (ERC) was changed to the European Repo and Collateral Council (ERCC).

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