Polish Financial Supervision Authority

Shortcuts

CESR Short-Selling Seminar, 3 December 2010

cesr_logo

Seminar was addressed to experts and policy advisors from CESR member-authorities. Participants gained insight into current short-selling and CDS-trading regulatory framework, as well as held an in-depth discussion on the European Commission’s Proposal for a Regulation on short selling and certain aspects of Credit Default Swaps, both from the supervisory and market perspective. Methods of short selling, experiences in operating a short sale marking regime as well as in operating short position reporting regime for equities were presented and discussed. The Seminar was co-organized by the KNF- Polish FSA and the UK Financial Services Authority. Mr. Marek Szuszkiewicz- Head of KNF securities supervision division gave an introductory speech. Discussion was moderated by Mr Dilwyn Griffiths from the UK FSA.

Presentations were given by:
- Dilwyn Griffiths, Senior Policy Adviser, UK FSA
- Philip Tod, DG Markt, European Commission
- Rodrigo Buenaventura, Head of Secondary Markets, CNMV, Spain
- Nicos Porfyris, Director of International Affairs Division, Athens Exchange
- Sebastian Siewiera, Deputy Director, Market Development Department, Warsaw Stock Exchange
- Anthony Byrne, Head of Securities Lending, Deutsche Bank.

In analyzing the EC's legislative proposal, seminar participants focused on the following subjects:

1. whether imposing a comparatively restrictive regime is likely to protect European markets' against a potential sudden slump/aggravating the sovereign debt-financing crisis? Particularly, article 12 of the draft Regulation was highlighted as it imposes the necessity to hold or at least "freeze" securities for clearing and settlement before entering a short-sale transaction. As regards CDS market, it was argued that current work by CESR committee on economic and market analysis (CEMA) does not prove a significant influence of the CDS prices on the sovereign bond prices. The EC representative explained the background assumptions of the Regulation and pointed at extensive consultation process which preceded the proposal.

2. what are the potential effects and regulatory benefits of the proposed disclosure regime of short positions and are the proposed thresholds optimal? According to Mr. Buenaventura representing the Spanish supervisory authority- CNMV (which has since May 2010 operated a disclosure regime on short positions laid down by CESR in March 2010) assessment of functioning of the regime is highly positive. It was underlined that disclosure of significant short positions has greatly increased transparency, while no serious disruptions of the process have materialized. Participants took notice of the industry's concerns about many potential unintended consequences of the Regulation, e.g. that public disclosure of short positions by large hedge funds may lead to a herding effect among individual investors that might want to follow "copycat" strategies. As the moderator Mr. Griffiths summed up, the impact assessments conducted to date to some extent alleviate these concerns, however "the devil lies in detail" therefore it will be eventually up to the new regulatory authority- ESMA to fine-tune the toolkit of the new regime.

Agenda