CHAPTER I

GENERAL PROVISIONS

Definitions
Article 2
1
For the purpose of this Regulation, the following definitions apply:
a
‘financial instrument’ means an instrument listed in Part 1 of Schedule 2 to the Regulated Activities Order 2001;
b
‘short sale’ in relation to a share or debt instrument means any sale of the share or debt instrument which the seller does not own at the time of entering into the agreement to sell including such a sale where at the time of entering into the agreement to sell the seller has borrowed or agreed to borrow the share or debt instrument for delivery at settlement, not including:
1. a sale by either party under a repurchase agreement where one party has agreed to sell the other a security at a specified price with a commitment from the other party to sell the security back at a later date at another specified price;
2. a transfer of securities under a securities lending agreement; or
3. entry into a futures contract or other derivative contract where it is agreed to sell securities at a specified price at a future date;
c
‘credit default swap’ means a derivative contract in which one party pays a fee to another party in return for a payment or other benefit in the case of a credit event relating to a reference entity and of any other default, relating to that derivative contract, which has a similar economic effect;
d
“
sovereign issuer
” means the United Kingdom, including any government department, or an agency or a special purpose vehicle of the United Kingdom;
e
‘sovereign credit default swap’ means a credit default swap where a payment or other benefit will be paid in the case of a credit event or default relating to a sovereign issuer;
f
‘sovereign debt’ means a debt instrument issued by a sovereign issuer;
g
‘issued sovereign debt’ means the total of sovereign debt issued by a sovereign issuer that has not been redeemed;
h
‘issued share capital’ in relation to a company, means the total of ordinary and any preference shares issued by the company but does not include convertible debt securities;
i. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
j. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
k
‘market making activities’ means the activities of an investment firm, a credit institution, a third-country entity, or a firm as referred to in point (ka), which is a member of a trading venue or of a market in a third country, the legal and supervisory framework of which has been declared equivalent by the Commission pursuant to Article 17(2) as it had effect before IP completion day, or by the Treasury in accordance with that paragraph as amended, where it deals as principal in a financial instrument, whether traded on or outside a trading venue, in any of the following capacities:
1. by posting firm, simultaneous two-way quotes of comparable size and at competitive prices, with the result of providing liquidity on a regular and ongoing basis to the market;
2. as part of its usual business, by fulfilling orders initiated by clients or in response to clients’ requests to trade;
3. by hedging positions arising from the fulfilment of tasks under points (i) and (ii);
ka
for the purposes of point (k), the firms referred to in this point are firms which provide investment services and/or perform investment activities consisting exclusively in dealing on own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets or which deal for the accounts of other members of those markets or make prices for them and which are guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such firms is assumed by clearing members of the same markets;
l
“
trading venue
” means—
1. a UK regulated market within the meaning of point (13A) of Article 2(1) of Regulation (EU) No 600/2014 ;
2. a UK multilateral trading facility within the meaning of point (14A) of Article 2(1) of Regulation (EU) No 600/2014;
m
‘principal venue’ in relation to a share means the venue for the trading of that share with the highest turnover;
n
‘authorised primary dealer’ means a natural or legal person who has signed an agreement with a sovereign issuer or who has been formally recognised as a primary dealer by or on behalf of a sovereign issuer and who, in accordance with that agreement or recognition, has committed to dealing as principal in connection with primary and secondary market operations relating to debt issued by that issuer;
o
‘central counterparty’ means a legal entity which interposes itself between the counterparties to the contracts traded within one or more financial markets, becoming the buyer to every seller and the seller to every buyer and which is responsible for the operation of a clearing system;
p
“
trading day
” in relation to a trading venue, means a day during which the trading venue concerned is open for trading;
q
“
turnover
”, in relation to a financial instrument, means the sum of the results of multiplying the number of units of that instrument exchanged between buyers and sellers in a defined period of time, pursuant to transactions taking place on a trading venue or otherwise, by the unit price applicable to each transaction;
r
“
FCA
” means the Financial Conduct Authority;
s
“
competent authority
” means—
i
in relation to the United Kingdom, the FCA;
ii
in relation to a Member State of the European Union, the authority which has been designated by that Member State as its competent authority for the purposes of Article 32 of this Regulation as it was in force immediately before IP completion day; and
iii
in relation to a third country which is not a Member State of the European Union, the supervisory authority which exercises functions equivalent to those exercised by competent authorities in Member States under this Regulation as it was in force immediately before IP completion day;
t
“
credit institution
” has the meaning given in Article 2(1)(17) of Regulation (EU) No 600/2014;
u
“
investment firm
” has the meaning given in Article 2(1A) of Regulation (EU) No 600/2014;
v
references to a “third country” (including in expressions including the words “third country”) are to be read as references to a country other than the United Kingdom;
w
“
Regulated Activities Order 2001
” means the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 ;
x
“
PRA
” means the Prudential Regulation Authority.
2
The Treasury may by regulations specify the definitions laid down in paragraph 1 of this Article, and in particular specify when a natural or legal person is considered to own a financial instrument for the purposes of the definition of short sale in point (b) of paragraph 1.
Words in Art. 2(1)(a) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(a) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 2(1)(ka) inserted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(e) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 2(1)(r)-(x) inserted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(i) (with savings in S.I. 2019/680, reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 9(a)(ii)); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(1)(k) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(d)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(1)(k) inserted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(d)(ii) (with savings in S.I. 2019/680, reg. 11) (as amended by S.I. 2020/1301, regs. 1, 3, Sch. para. 9(a)(i)); 2020 c. 1, Sch. 5 para. 1(1)
Art. 2(1)(p) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(g) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 2(1)(q) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(h) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(3)(i) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Words in Art. 2(2) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(3)(ii) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 2(1)(i)(j) omitted (31.12.2020) by virtue of The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(c) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 2(1)(d) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(b) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)
Art. 2(1)(l) substituted (31.12.2020) by The Short Selling (Amendment) (EU Exit) Regulations 2018 (S.I. 2018/1321), regs. 1(2), 5(2)(f) (with savings in S.I. 2019/680, reg. 11); 2020 c. 1, Sch. 5 para. 1(1)