CJEU names a date for UK short selling challenge
17 May 2013 Luxembourg
Image: Shutterstock
A UK challenge to the extended authority of the European Securities and Markets Authority (ESMA) under the EU Regulation on Short Selling will be heard in the Court of Justice of the EU (CJEU) on 11 June.
The UK filed its complaint with the CJEU on 1 June 2012, challenging Article 28 of the short selling regulation.
The short selling regulation requires holders of net short positions in stocks or sovereign debt to notify regulators when certain thresholds are breached, and places certain restrictions on investors when entering into uncovered positions.
It also gives regulators the power to suspend short selling or limit transactions when the price of various instruments, including stocks, sovereign and corporate bonds, and exchange-traded funds, fall a set percentage from the previous day’s closing price.
The regulation came into effect on 1 November 2012.
The UK is contesting Article 28 because it gives ESMA too big a mandate, according to the complaint.
Article 28—“ESMA intervention powers in exceptional circumstances"—allows the agency to prohibit or impose conditions on who can conduct short selling, and require short sellers to publicise any positions.
The power that this gives to ESMA goes above and beyond EU treaties, said the UK in its complaint.
Article 28 confers on ESMA “a large measure of discretion” and “the factors which ESMA must take into account contain tests which are highly subjective”, argued the UK in its complaint.
It added: “ESMA is empowered to renew its measures without any limit on their overall duration.”
Removing Article 28 from the short selling regulation would leave the remainder of it largely intact, the UK concluded.
The UK filed its complaint with the CJEU on 1 June 2012, challenging Article 28 of the short selling regulation.
The short selling regulation requires holders of net short positions in stocks or sovereign debt to notify regulators when certain thresholds are breached, and places certain restrictions on investors when entering into uncovered positions.
It also gives regulators the power to suspend short selling or limit transactions when the price of various instruments, including stocks, sovereign and corporate bonds, and exchange-traded funds, fall a set percentage from the previous day’s closing price.
The regulation came into effect on 1 November 2012.
The UK is contesting Article 28 because it gives ESMA too big a mandate, according to the complaint.
Article 28—“ESMA intervention powers in exceptional circumstances"—allows the agency to prohibit or impose conditions on who can conduct short selling, and require short sellers to publicise any positions.
The power that this gives to ESMA goes above and beyond EU treaties, said the UK in its complaint.
Article 28 confers on ESMA “a large measure of discretion” and “the factors which ESMA must take into account contain tests which are highly subjective”, argued the UK in its complaint.
It added: “ESMA is empowered to renew its measures without any limit on their overall duration.”
Removing Article 28 from the short selling regulation would leave the remainder of it largely intact, the UK concluded.
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