Regulation (EU) No 236/2012 of the European Parliament and of the CouncilDangos y teitl llawn

CHAPTER III U.K. UNCOVERED SHORT SALES

Article 12 U.K. Restrictions on uncovered short sales in shares

1. A natural or legal person may enter into a short sale of a share admitted to trading on a trading venue only where one of the following conditions is fulfilled:

(a) the natural or legal person has borrowed the share or has made alternative provisions resulting in a similar legal effect;

(b) the natural or legal person has entered into an agreement to borrow the share or has another absolutely enforceable claim under contract or property law to be transferred ownership of a corresponding number of securities of the same class so that settlement can be effected when it is due;

(c) the natural or legal person has an arrangement with a third party under which that third party has confirmed that the share has been located and has taken measures vis-à-vis third parties necessary for the natural or legal person to have a reasonable expectation that settlement can be effected when it is due.

2. [F1 For the purposes of paragraph 1, the FCA may make] implementing technical standards to determine the types of agreements, arrangements and measures that adequately ensure that the share will be available for settlement. In determining what measures are necessary to have a reasonable expectation that settlement can be effected when it is due, [F2 the FCA] shall take into account, inter alia, the intraday trading and the liquidity of the shares.

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Textual Amendments

F1 Words in Art. 12(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(1)(a)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F2 Words in Art. 12(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(1)(a)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F3 Words in Art. 12(2) omitted (31.12.2020) by virtue of The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(1)(b) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Article 13 U.K. Restrictions on uncovered short sales in sovereign debt

1. A natural or legal person may enter into a short sale of sovereign debt only where one of the following conditions is fulfilled:

(a) the natural or legal person has borrowed the sovereign debt or has made alternative provisions resulting in a similar legal effect;

(b) the natural or legal person has entered into an agreement to borrow the sovereign debt or has another absolutely enforceable claim under contract or property law to be transferred ownership of a corresponding number of securities of the same class so that settlement can be effected when it is due;

(c) the natural or legal person has an arrangement with a third party under which that third party has confirmed that the sovereign debt has been located or otherwise has a reasonable expectation that settlement can be effected when it is due.

2. The restrictions in paragraph 1 do not apply if the transaction serves to hedge a long position in debt instruments of an issuer, the pricing of which has a high correlation with the pricing of the given sovereign debt.

3. Where the liquidity of sovereign debt falls below the threshold determined in accordance with the methodology referred to in [F4 Commission Delegated Regulation (EU) No 918/2012 or in regulations made by the Treasury under] paragraph 4, the restrictions referred to in paragraph 1 may be temporarily suspended by the [F5 FCA]. F6 ...

A suspension shall be valid for an initial period not exceeding 6 months from the date of its publication on the website of the [F7 FCA]. The suspension may be renewed for periods not exceeding 6 months if the grounds for the suspension continue to apply. If the suspension is not renewed by the end of the initial period or of any subsequent renewal period it shall automatically expire.

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4. The [F9 Treasury may by regulations specify] the parameters and methods for calculating the threshold of liquidity referred to in paragraph 3 of this Article in relation to issued sovereign debt.

The parameters and methods F10 ... to calculate the threshold shall be set in such a way that where it is reached, it represents a significant decline relative to the average level of liquidity for the sovereign debt concerned.

The threshold shall be defined based on objective criteria specific to the relevant sovereign debt market, including the total amount of outstanding issued sovereign debt for [F11 the sovereign] issuer.

5. [F12 For the purposes of paragraph 1, the FCA may make] implementing technical standards to determine the types of agreements or arrangements that adequately ensure that the sovereign debt will be available for settlement. [F13 The FCA] shall, in particular, take into account the need to preserve liquidity of markets, especially sovereign bond and sovereign bond repurchase markets.

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Textual Amendments

F4 Words in Art. 13(3) inserted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(a)(i)(aa) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F5 Word in Art. 13(3) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(a)(i)(bb) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F6 Words in Art. 13(3) omitted (31.12.2020) by virtue of The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(a)(i)(cc) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F7 Word in Art. 13(3) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(a)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F8 Words in Art. 13(3) omitted (31.12.2020) by virtue of The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(a)(iii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F9 Words in Art. 13(4) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(b)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F10 Words in Art. 13(4) omitted (31.12.2020) by virtue of The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(b)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F11 Words in Art. 13(4) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(b)(iii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F12 Words in Art. 13(5) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(c)(i)(aa) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F13 Words in Art. 13(5) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(c)(i)(bb) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F14 Words in Art. 13(5) omitted (31.12.2020) by virtue of The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(2)(c)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

Article 14 U.K. Restrictions on uncovered sovereign credit default swaps

1. A natural or legal person may enter into sovereign credit default swap transactions only where that transaction does not lead to an uncovered position in a sovereign credit default swap as referred to in Article 4.

2. [F15 The FCA] may temporarily suspend restrictions referred to in paragraph 1, where it has objective grounds for believing that its sovereign debt market is not functioning properly and that such restrictions might have a negative impact on the sovereign credit default swap market, especially by increasing the cost of borrowing for [F16 the sovereign issuer] or affecting the sovereign [F17 issuer's ability] to issue new debt. Those grounds shall be based on the following indicators:

(a) a high or rising interest rate on the sovereign debt;

(b) a widening of interest rate spreads on the sovereign debt compared to the sovereign debt of other sovereign issuers;

(c) a widening of the sovereign credit default swap spreads compared to the own curve and compared to other sovereign issuers;

(d) the timeliness of the return of the price of the sovereign debt to its original equilibrium after a large trade;

(e) the amounts of sovereign debt that can be traded.

The [F18 FCA] may also use indicators other than those set out in points (a) to (e) of the first subparagraph.

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A suspension shall be valid for an initial period not exceeding 12 months from the date of its publication on the website of the [F20 FCA]. The suspension may be renewed for periods not exceeding 6 months if the grounds for the suspension continue to apply. If the suspension is not renewed by the end of the initial period or of any subsequent renewal period, it shall automatically expire.

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Textual Amendments

F15 Words in Art. 14(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(3)(a)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F16 Words in Art. 14(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(3)(a)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F17 Words in Art. 14(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(3)(a)(iii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F18 Word in Art. 14(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(3)(b) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F19 Words in Art. 14(2) omitted (31.12.2020) by virtue of The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(3)(c) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F20 Word in Art. 14(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 9(3)(d) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)

F21 F22 Article 15 U.K. [F21 Buy-in procedures]

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Textual Amendments

F21 Deleted by Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (Text with EEA relevance).

F22 Art. 15 amended (31.12.2020) by The Uncertificated Securities (Amendment and EU Exit) Regulations 2019 (S.I. 2019/679), regs. 1(3), 15 (with regs. 10-12); 2020 c. 1, Sch. 5 para. 1(1)