On November 15, the European Parliament passed a resolution adopting, with amendments, the European Commission’s proposal for a regulation on short selling and certain aspects of credit default swaps (CDS).

The European Parliament’s amendments to the Commission’s original proposal include:
 

• Restrictions on entering into an uncovered (naked) CDS relating to an obligation of a sovereign issuer.
• Excluding from the definition of short sale certain sales by either party under a repurchase agreement or securities lending agreement and entering into a futures contract or other derivatives contract where it is agreed to sell securities at a specified price at a future date.
• A new requirement that holders of significant net short positions keep records of their significant net short position for five years.
• The requirement to report net short positions equivalent to 0.5% or more of the issued share capital of an issuer remains.
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The Regulation must now be formally approved by the European Council of Ministers. Although the text adopted by Parliament provides for the Regulation to apply from November 1, 2012, it is likely that the date it will come into effect will be 12 months after approval by the Council of Ministers.

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