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24.3.2012 Official
Journal
of
the
European
Union
L
86/1
I
(Legislative acts)
REGULATIONS
REGULATION (EU) No 236/2012 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
of 14 March 2012
on short selling and certain aspects of credit default swaps
(Text with EEA relevance)
THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
divergent as the Union lacks a specific common regu
EUROPEAN UNION,
latory framework for dealing with short selling issues.
Having regard to the Treaty on the Functioning of the European
(2) To
ensure
the
proper
functioning
of
the
internal
market
Union, and in particular Article 114 thereof,
and to improve the conditions of its functioning, in
particular with regard to the financial markets, and to
ensure a high level of consumer and investor protection,
Having regard to the proposal from the European Commission,
it is therefore appropriate to lay down a common regu
latory framework with regard to the requirements and
powers relating to short selling and credit default
swaps and to ensure greater coordination and
After transmission of the draft legislative act to the national
consistency between Member States where measures
parliaments,
have to be taken in exceptional circumstances. It is
necessary to harmonise the rules for short selling and
certain aspects of credit default swaps, to prevent the
Having regard to the opinion of the European Central Bank ( 1 ),
creation of obstacles to the proper functioning of the
internal market, as otherwise it is likely that Member
States continue taking divergent measures.
Having regard to the opinion of the European Economic and
Social Committee ( 2 ),
(3) It
is
appropriate
and
necessary
for
those
rules
to
take
the
legislative form of a regulation in order to ensure that
Acting in accordance with the ordinary legislative procedure (
provisions directly imposing obligations on private

3 ),
parties to notify and disclose net short positions
relating to certain instruments and regarding uncovered
short selling are applied in a uniform manner throughout
Whereas:
the Union. A regulation is also necessary to confer
powers on the European Supervisory Authority
(European Securities and Markets Authority) (ESMA)
(1)
At the height of the financial crisis in September 2008,
established by Regulation (EU) No 1095/2010 of the
competent authorities in several Member States and
European Parliament and of the Council ( 4 ) to coordinate
supervisory authorities in third countries such as the
measures taken by competent authorities or to take
United States of America and Japan adopted emergency
measures itself.
measures to restrict or ban short selling in some or all
securities. They acted due to concerns that at a time of
considerable financial instability, short selling could
(4) The
scope
of
this
Regulation
should
be
as
broad
as
aggravate the downward spiral in the prices of shares,
possible to provide for a preventive regulatory
notably in financial institutions, in a way which could
framework to be used in exceptional circumstances.
ultimately threaten their viability and create systemic
That framework should cover all financial instruments
risks. The measures adopted by Member States were
but should provide for a proportionate response to the
risks that short selling of different instruments could
( 1 ) OJ C 91, 23.3.2011, p. 1.
represent. It is therefore only in the case of exceptional
( 2 ) OJ C 84, 17.3.2011, p. 34.
circumstances that competent authorities and ESMA
( 3 ) Position of the European Parliament of 15 November 2011 (not yet
published in the Official Journal) and decision of the Council of
21 February 2012.
( 4 ) OJ L 331, 15.12.2010, p. 84.

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Official Journal of the European Union
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should be entitled to take measures concerning all types
(9) The
notification
requirements
relating
to
sovereign
debt
of financial instruments, going beyond the permanent
should apply to the debt instruments issued by a Member
measures that only apply to particular types of
State and by the Union, including the European
instruments where there are clearly identified risks that
Investment Bank, a Member State’s government
need to be addressed.
department, agency, special purpose vehicle or inter
national financial institution established by two or
more Member States that issues debt on behalf of a
Member State or on behalf of several Member States,
such as the European Financial Stability Facility or the
prospective European Stability Mechanism. In the case of
(5) To
end
the
current
fragmented
situation
in
which
some
federal Member States, the notification requirements
Member States have taken divergent measures and to
should also apply to debt instruments issued by a
restrict the possibility that divergent measures are taken
member of the federation. They should not, however,
by competent authorities it is important to address the
apply to other regional or local bodies or quasi-public
potential risks arising from short selling and credit
bodies in a Member State that issue debt instruments.
default swaps in a harmonised manner. The requirements
The objective of debt instruments issued by the Union
to be imposed should address the identified risks without
is to provide balance of payments or financial stability
unduly detracting from the benefits that short selling
support to Member States or macro-financial assistance
provides to the quality and efficiency of markets. While
to third countries.
in certain situations it could have adverse effects, under
normal market conditions, short selling plays an
important role in ensuring the proper functioning of
financial markets, in particular in the context of market
liquidity and efficient price formation.
(10) In
order
to
ensure
comprehensive
and
effective
trans
parency, it is important that the notification requirements
cover not only short positions created by trading shares
(6)
References in this Regulation to natural and legal persons
or sovereign debt on trading venues but also short
should include registered business associations without
positions created by trading outside trading venues and
legal personality.
net short positions created by the use of derivatives, such
as options, futures, index-related instruments, contracts
for differences and spread bets relating to shares or
sovereign debt.
(7) Enhanced
transparency
relating
to
significant
net
short
positions in specific financial instruments is likely to be
of benefit to both the regulator and market participants.
For shares admitted to trading on a trading venue in the
Union, a two-tier model that provides for greater trans
(11) To
be
useful
to
regulators
and
markets,
any
transparency
parency of significant net short positions in shares at the
regime should provide complete and accurate
appropriate level should be introduced. At the lower
information about a natural or legal person’s positions.
threshold, notification of a position should be made
In particular, information provided to the regulator or to
privately to the regulators concerned to enable them to
the market should take into account both short and long
monitor and, where necessary, investigate short selling
positions so as to provide valuable information about the
that could create systemic risks, be abusive or create
natural or legal person’s net short position in shares,
disorderly markets; at the higher threshold, positions
sovereign debt and credit default swaps.
should be publicly disclosed to the market in order to
provide useful information to other market participants
about significant individual short positions in shares.
(12) The
calculation
of
short
or
long
positions
should
take
into account any form of economic interest which a
(8) A
requirement
to
notify
regulators
of
significant
net
natural or legal person has in relation to the issued
short positions relating to sovereign debt in the Union
share capital of a company or to the issued sovereign
should be introduced as such notification would provide
debt of a Member State or of the Union. In particular, it
important information to assist regulators in monitoring
should take into account such an economic interest
whether such positions are in fact creating systemic risks
obtained directly or indirectly through the use of
or being used for abusive purposes. Such a requirement
derivatives such as options, futures, contracts for
should only include private disclosure to regulators as
differences and spread bets relating to shares or
publication of information to the market for such
sovereign debt, and indices, baskets of securities and
instruments could have a detrimental effect on
exchange traded funds. In the case of positions relating
sovereign debt markets where liquidity is already
to sovereign debt it should also take into account credit
impaired.
default swaps relating to sovereign debt issuers.

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(13) In
addition
to
the
transparency
regime
provided
for
in
agreed to sell securities at a specified price at a future
this Regulation, the Commission should consider, in the
date. The definition should not include a transfer of
context of its revision of Directive 2004/39/EC of the
securities under a securities lending agreement.
European Parliament and of the Council of 21 April
2004 on markets in financial instruments ( 1 ), whether
inclusion by investment firms of information about
short sales in transaction reports to competent auth
orities would provide useful supplementary information
(18) Uncovered
short
selling
of
shares
and
sovereign
debt
is
to enable competent authorities to monitor levels of
sometimes viewed as increasing the potential risk of
short selling.
settlement failure and volatility. To reduce such risks it
is appropriate to place proportionate restrictions on
uncovered short selling of such instruments. The
detailed restrictions should take into account the
different arrangements currently used for covered short
selling. These include a separate repurchase agreement on
(14) Buying credit default swaps without having a long
position in underlying sovereign debt or any assets,
the basis of which the person selling a security short
portfolio of assets, financial obligations or financial
buys back an equivalent security in due time to allow
contracts the value of which is correlated to the value
settlement of the short sale transaction and includes
of the sovereign debt, can be, economically speaking,
collateral arrangements if the collateral taker can use
equivalent to taking a short position on the underlying
the security for settling the short sale transaction.
debt instrument. The calculation of a net short position
Further examples include rights issues (offerings) of
in relation to sovereign debt should therefore include
companies to existing shareholders, lending pools and
credit default swaps relating to an obligation of a
repurchase agreement facilities provided, for instance,
sovereign debt issuer. The credit default swap position
by trading venues, clearing systems or central banks.
should be taken into account both for the purposes of
determining whether a natural or legal person has a
significant net short position relating to sovereign debt
that needs to be notified to a competent authority and
(19) In
relation
to
uncovered
short
selling
of
shares
it
is
where a competent authority suspends restrictions on
necessary for a natural or legal person to have an
uncovered credit default swap transactions for the
arrangement with a third party under which the third
purposes of determining the significant uncovered
party has confirmed that the share has been located,
position in a credit default swap relating to a sovereign
which means that the third party confirms that it
debt issuer that needs to be notified to the competent
considers that it can make the share available for
authority.
settlement when it is due. In order to give this confir
mation it is necessary for measures to be taken vis-à-vis
third parties for the natural or legal person to have a
reasonable expectation that settlement can be effected
when it is due. This includes measures such as a third
(15) To
enable
ongoing
monitoring
of
positions,
the
trans
party having allocated the shares for borrowing or
parency regime should also include notification or
purchase so that settlement can be effected when it is
disclosure where a change in a net short position
due. With regard to short sales to be covered by purchase
results in an increase or decrease above or below
of the share during the same day this includes confir
certain thresholds.
mation by the third party that it considers the share to
be easy to borrow or to purchase. The liquidity of the
shares, in particular the level of turnover and the ease
with which buying, selling and borrowing can take place
with minimum market impact, should be taken into
(16) In order to be effective, it is important that the trans
account by ESMA in determining what measures are
parency regime apply regardless of where the natural or
necessary in order to have a reasonable expectation
legal person is located, including in a third country,
that settlement can be effected when it is due.
where that person has a significant net short position
in a company that has shares admitted to trading on a
trading venue in the Union or a net short position in
sovereign debt issued by a Member State or by the
Union.
(20) In
relation
to
uncovered
short
selling
of
sovereign
debt,
the fact that a short sale will be covered by the purchase
of the sovereign debt during the same day can be
considered as an example of offering a reasonable expec
tation that settlement can be effected when it is due.
(17) The
definition
of
a
short
sale
should
not
include
a
repurchase agreement between two parties where one
party sells the other a security at a specified price with
a commitment to buy the security back at a later date at
(21) Sovereign
credit
default
swaps
should
be
based
on
the
another specified price or a derivative contract where it is
insurable interest principle whilst recognising that there
can be interests in a sovereign issuer other than bond
( 1 ) OJ L 145, 30.4.2004, p. 1.
ownership. Such interests include hedging against the risk

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L 86/4
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Official Journal of the European Union
24.3.2012
of default of the sovereign issuer where a natural or legal
on another market participant to perform operationally
person has a long position in the sovereign debt of that
the buy-in or impose the fine. However, for the proper
issuer or hedging against the risk of a decline in the value
functioning of financial markets it is essential to address
of the sovereign debt where the natural or legal person
wider aspects of settlement discipline in a horizontal
holds assets or is subject to liabilities which refer to
legislative proposal.
public or private sector entities in the Member State
concerned, the value of which is correlated to the value
of the sovereign debt. Such assets should include
financial contracts, a portfolio of assets or financial
obligations, as well as interest rate or currency swap
transactions with respect to which the sovereign credit
default swap is used as a counterparty risk management
(24) Measures
relating
to
sovereign
debt
and
sovereign
credit
tool for hedging exposure on financial and foreign trade
default swaps including increased transparency and
contracts. No position or portfolio of positions used in
restrictions on uncovered short selling should impose
the context of hedging exposures to a sovereign should
requirements which are proportionate and at the same
be considered an uncovered position in a sovereign credit
time avoid an adverse impact on the liquidity of
default swap. This includes any exposures to the central,
sovereign bond markets and sovereign bond repurchase
regional and local administration, public sector entities or
markets.
any exposure guaranteed by any referred entity.
Furthermore, exposure to private sector entities estab
lished in the Member State concerned should also be
included. All exposures should be considered in this
context including loans, counterparty credit risk
(including potential exposure when regulatory capital is
required to such exposure), receivables and guarantees.
(25) Shares
are
increasingly
admitted
to
trading
on
different
This also includes indirect exposures to any of the
trading venues within the Union and in third countries.
referred entities obtained, inter alia, through exposure
Many large companies based in a third country also have
to indices, funds or special purpose vehicles.
shares admitted to trading on a trading venue within the
Union. For reasons of efficiency, it is appropriate to
exempt securities from certain notification and disclosure
requirements, where the principal venue for trading of
that instrument is in a third country.
(22) Since entering into a sovereign
credit default swap
without underlying exposure to the risk of a decline in
the value of the sovereign debt could have an adverse
(26) Market
making
activities
play
a
crucial
role
in
providing
impact on the stability of sovereign debt markets, natural
liquidity to markets within the Union and market makers
or legal persons should be prohibited from entering into
need to take short positions to perform that role.
such uncovered credit default swap positions. However,
Imposing requirements on such activities could severely
at the very first signal that the sovereign debt market is
inhibit their ability to provide liquidity and have a
not functioning properly, the competent authority should
significant adverse impact on the efficiency of the
be able to suspend such a restriction temporarily. Such a
Union markets. Furthermore market makers would not
suspension should be based on the belief of the
be expected to take significant short positions except for
competent authority based on objective grounds
very brief periods. It is therefore appropriate to exempt
following an analysis of the indicators set out in this
natural or legal persons involved in such activities from
Regulation. Competent authorities should also be able
requirements which could impair their ability to perform
to use additional indicators.
such a function and therefore adversely affect the Union
markets. In order for such requirements to capture
equivalent third-country entities a procedure is
necessary to assess the equivalence of third-country
markets. The exemption should apply to the different
types of market-making activity but not to proprietary
trading. It is also appropriate to exempt certain primary
market operations such as those relating to sovereign
debt and stabilisation schemes as they are important
(23) It is also appropriate to include requirements on central
activities that assist the efficient functioning of markets.
counterparties relating to buy-in procedures and fines for
Competent authorities should be notified of the use of
failed settlement of transactions in shares. The buy-in
exemptions and should have the power to prohibit a
procedures and late settlement requirements should set
natural or legal person from using an exemption if
basic standards relating to settlement discipline. The buy-
they do not fulfil the relevant criteria in the exemption.
in and fining requirements should be sufficiently flexible
Competent authorities should also be able to request
to permit the central counterparty that is responsible for
information from the natural or legal person to
ensuring such procedures are in place to be able to rely
monitor their use of the exemption.

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(27) In
the
case
of
adverse
developments
which
constitute
a
(31) Where
an
adverse
event
or
development
extends
beyond
serious threat to financial stability or to market
a single Member State or has other cross-border impli
confidence in a Member State or the Union, competent
cations, for example if a financial instrument is admitted
authorities should have powers of intervention to require
to trading on different trading venues in a number of
further transparency or to impose temporary restrictions
different Member States, close consultation and
on short selling, credit default swap transactions or other
cooperation between competent authorities is essential.
transactions in order to prevent a disorderly decline in
ESMA should perform a key coordination role in such
the price of a financial instrument. Such measures could
a situation and should try to ensure consistency between
be necessary due to a variety of adverse events or devel
competent authorities. The composition of ESMA, which
opments including not just financial or economic events
includes representatives of competent authorities, will
but also for example natural disasters or terrorist acts.
assist it in the performance of such a role. In addition,
Furthermore, some adverse events or developments
competent authorities should have power to take
requiring measures could arise in a single Member State
measures where they have an interest in intervening.
and have no cross-border implications. Such powers need
to be flexible enough to enable competent authorities to
deal with a range of different exceptional circumstances.
In taking such measures, competent authorities should
pay due regard to the principle of proportionality.
(32) In
addition
to
coordinating
measures
by
competent
auth
orities, ESMA should ensure that measures are taken by
competent authorities only where necessary and propor
tionate. ESMA should be able to give opinions to
competent authorities on the use of powers of inter
(28) As
this
Regulation
addresses
only
restrictions
on
short
vention.
selling and credit default swaps to prevent a disorderly
decline in the price of a financial instrument, the need
for other types of restrictions such as position limits or
restrictions on products, which may give rise to serious
investor protection concerns, are more appropriately
considered in the context of the Commission’s revision
(33) While
competent
authorities
will
often
be
best
placed
to
of Directive 2004/39/EC.
monitor and to react quickly to an adverse event or
development, ESMA should also have the power to
take measures where short selling and other related
activities threaten the orderly functioning and integrity
of financial markets or the stability of the whole or
part of the financial system in the Union, where there
(29) While
competent
authorities
are
usually
best
placed
to
are cross-border implications and competent authorities
monitor market conditions and to react initially to an
have not taken sufficient measures to address the threat.
adverse event or development by deciding if a serious
ESMA should consult the European Systemic Risk Board
threat to financial stability or to market confidence has
(ESRB) established by Regulation (EU) No 1092/2010 of
arisen and whether it is necessary to take measures to
the European Parliament and of the Council of
address such a situation, powers in this regard and the
24 November 2010 on European Union macro-
conditions and procedures for their use should be
prudential oversight of the financial system and estab
harmonised as far as possible.
lishing a European Systemic Risk Board
( 1 ) where
possible, and other relevant authorities where such a
measure could have effects beyond the financial
markets, as could be the case for commodity derivatives
which are used to hedge physical positions.
(30) In the case of a significant fall in the price of a financial
instrument on a trading venue a competent authority
should also have the ability to restrict temporarily short
selling of the financial instrument on that venue within
its own jurisdiction or to request that ESMA restrict such
(34) ESMA’s
powers
under
this
Regulation
to
restrict
short
short selling in other jurisdictions in order to be able to
selling and other related activities in exceptional circum
intervene rapidly where appropriate and for a short
stances are in accordance with Article 9(5) of Regulation
period to prevent a disorderly decline in price of the
(EU) No 1095/2010. Those powers should be without
instrument concerned. The competent authority should
prejudice to the powers of ESMA in an emergency
also be required to notify ESMA of such a decision so
situation under Article 18 of Regulation (EU)
that ESMA can immediately inform the competent auth
No 1095/2010. In particular, ESMA should be able to
orities of other Member States with venues which trade
adopt individual decisions requiring competent auth
the same instrument, coordinate the taking of measures
orities to take measures or individual decisions
by those other Member States and, if necessary, assist
addressed to financial market participants under
them in reaching an agreement or take a decision itself,
Article 18 of Regulation (EU) No 1095/2010.
in accordance with Article 19 of Regulation (EU)
No 1095/2010.
( 1 ) OJ L 331, 15.12.2010, p. 1.

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(35) References
in
this
Regulation
to
Articles
18
and
38
of
of information by competent authorities should take
Regulation (EU) No 1095/2010 are of a declaratory
place in accordance with the rules on the transfer of
nature. Those articles apply even in the absence of
personal data as laid down in Directive 95/46/EC of
such references.
the European Parliament and of the Council of
24 October 1995 on the protection of individuals with
regard to the processing of personal data and on the free
movement of such data ( 1 ). Any exchange or trans
(36) Powers of intervention of competent authorities and
mission of information by ESMA should take place in
ESMA to restrict short selling, credit default swaps and
accordance with the rules on the transfer of personal data
other transactions should be only of a temporary nature
as laid down in Regulation (EC) No 45/2001 of the
and should be exercised only for such a period and to
European Parliament and of the Council of 18 December
the extent necessary to deal with the specific threat.
2000 on the protection of individuals with regard to the
processing of personal data by the Community insti
tutions and bodies and on the free movement of such
data ( 2 ), which should be fully applicable to the
(37) Because
of
the
specific
risks
which
can
arise
from
the
use
processing of personal data for the purposes of this
of credit default swaps, such transactions require close
Regulation.
monitoring by competent authorities. In particular,
competent authorities should, in exceptional cases, have
the power to require information from natural or legal
persons entering into such transactions about the
(41) Taking
into
consideration
the
principles
set
out
in
the
purpose for which the transaction is entered into.
Commission’s Communication on reinforcing sanc
tioning regimes in the financial services sector and legal
acts of the Union adopted as a follow-up to that
Communication, Member States should lay down rules
(38) ESMA
should
be
given
power
to
conduct
an
inquiry
into
on penalties and administrative measures applicable to
an issue or practice relating to short selling or the use of
infringements of the provisions of this Regulation and
credit default swaps to assess whether that issue or
should ensure that they are implemented. Those
practice poses any potential threat to financial stability
penalties and administrative measures should be effective,
or to market confidence. ESMA should publish a report
proportionate and dissuasive. They should be based on
setting out its findings where it conducts such an inquiry.
guidelines adopted by ESMA to promote convergence
and cross-sector consistency of penalty regimes in the
financial sector.
(39) As some of the provisions of this Regulation apply to
natural or legal persons and actions in third countries, it
(42) In
order
to
ensure
uniform
conditions
for
the
implemen
is necessary that competent authorities and supervisory
tation of this Regulation, implementing powers should be
authorities in third countries cooperate in certain situ
conferred on the Commission. Those powers should be
ations. Competent authorities should therefore enter
exercised in accordance with Regulation (EU)
into arrangements with supervisory authorities in third
No 182/2011 of the European Parliament and of the
countries. ESMA should coordinate the development of
Council of 16 February 2011 laying down the rules
such cooperation arrangements and the exchange
and general principles concerning mechanisms for
between competent authorities of information received
control by Member States of the Commission’s exercise
from third countries.
of implementing powers ( 3 ). The Commission should
keep the European Parliament informed of progress
relating to decisions determining the equivalence of
third-country legal and supervisory frameworks with
(40) This
Regulation respects the fundamental rights and
requirements of this Regulation.
observes the principles recognised in particular in the
Treaty on the Functioning of the European Union
(TFEU) and in the Charter of Fundamental Rights of
the European Union (Charter), in particular the right to
(43) The
power
to
adopt
acts
in
accordance
with
Article
290
the protection of personal data provided for in Article 16
TFEU should be delegated to the Commission in respect
TFEU and in Article 8 of the Charter. Transparency
of details concerning calculating short positions, where a
regarding significant net short positions, including
natural or legal person has an uncovered position in a
public disclosure above a certain threshold, where
credit default swap, notification or disclosure thresholds
provided for under this Regulation, is necessary for
and further specification of criteria and factors for deter
reasons of financial market stability and investor
mining in which cases an adverse event or development
protection. Such transparency will enable regulators to
creates a serious threat to financial stability or to market
monitor the use of short selling in connection with
confidence in a Member State or the Union. It is of
abusive strategies and the implications of short selling
particular importance that the Commission carry out
on the proper functioning of the markets. In addition,
appropriate consultations during its preparatory work,
such transparency could help reduce information asym
metries, ensuring that all market participants are
( 1 ) OJ L 281, 23.11.1995, p. 31.
adequately informed about the extent to which short
( 2 ) OJ L 8, 12.1.2001, p. 1.
selling is affecting prices. Any exchange or transmission
( 3 ) OJ L 55, 28.2.2011, p. 13.

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including at the level of experts of the relevant institu
(b) derivatives referred to in points (4) to (10) of Section C of
tions, authorities and agencies, where appropriate. The
Annex I to Directive 2004/39/EC that relate to a financial
Commission, when preparing and drawing up delegated
instrument referred to in point (a) or to an issuer of such a
acts, should ensure a simultaneous, timely and appro
financial instrument, including such derivatives when traded
priate transmission of relevant documents to the
outside a trading venue;
European Parliament and to the Council.
(c) debt instruments issued by a Member State or the Union
and derivatives referred to in points (4) to (10) of Section C
(44) The
Commission
should
submit
a
report
to
the
European
of Annex I to Directive 2004/39/EC that relate or are
Parliament and the Council assessing the appropriateness
referenced to debt instruments issued by a Member State
of the notification and public disclosure thresholds
or the Union.
provided for, the operation of the restrictions and
requirements relating to the transparency of net short
positions, and whether any other restrictions or
2. Articles 18, 20 and 23 to 30 shall apply to all financial
conditions on short selling or credit default swaps are
instruments within the meaning of point (a) of Article 2(1).
appropriate.
Article 2
(45) Since the objectives of this Regulation cannot be suffi
Definitions
ciently achieved by the Member States, although
competent authorities are better placed to monitor, and
1. For the purpose of this Regulation, the following defi
have better knowledge of, market developments, the
nitions apply:
overall impact of the problems relating to short selling
and credit default swaps can be fully perceived only in a
Union context, and can therefore be better achieved at
(a) ‘financial instrument’ means an instrument listed in Section
Union level, the Union may adopt measures, in
C of Annex I to Directive 2004/39/EC;
accordance with the principle of subsidiarity as set out
in Article 5 of the Treaty on European Union. In
accordance with the principle of proportionality, as set
(b) ‘short sale’ in relation to a share or debt instrument means
out in that Article, this Regulation does not go beyond
any sale of the share or debt instrument which the seller
what is necessary in order to achieve those objectives.
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
(46) Since
some
Member
States
have
already
put
in
place
settlement, not including:
restrictions on short selling and since this Regulation
provides for delegated acts and binding technical
standards which should be adopted before it can be
(i) a sale by either party under a repurchase agreement
usefully applied, it is necessary to provide for a sufficient
where one party has agreed to sell the other a security
period of time for transitional purposes. Since it is
at a specified price with a commitment from the other
essential to specify, before 1 November 2012, key non-
party to sell the security back at a later date at another
essential elements which will facilitate compliance by
specified price;
market participants with this Regulation and enforcement
by competent authorities, it is also necessary to provide
the Commission with the means to adopt the technical
(ii) a transfer of securities under a securities lending
standards and delegated acts before that date,
agreement; or
HAVE ADOPTED THIS REGULATION:
(iii) entry into a futures contract or other derivative
contract where it is agreed to sell securities at a
specified price at a future date;
CHAPTER I
(c) ‘credit default swap’ means a derivative contract in which
GENERAL PROVISIONS
one party pays a fee to another party in return for a
Article 1
payment or other benefit in the case of a credit event
relating to a reference entity and of any other default,
Scope
relating to that derivative contract, which has a similar
1. This
Regulation
shall
apply
to
the
following:
economic effect;
(d) ‘sovereign issuer’ means any of the following that issues
(a) financial instruments within the meaning of point (a) of
debt instruments:
Article 2(1) that are admitted to trading on a trading
venue in the Union, including such instruments when
traded outside a trading venue;
(i) the Union;

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L 86/8
EN
Official Journal of the European Union
24.3.2012
(ii) a Member State, including a government department,
(iv) in relation to a natural person, the Member State in
an agency, or a special purpose vehicle of the Member
which that person’s head office is situated, or, where
State;
there is no head office, the Member State in which that
person is domiciled;
(iii) in the case of a federal Member State, a member of the
federation;
(j) ‘relevant
competent
authority’
means:
(iv) a special purpose vehicle for several Member States;
(i) in relation to sovereign debt of a Member State, or, in
the case of a federal Member State, in relation to
sovereign debt of a member of the federation, or a
(v) an international financial institution established by two
credit default swap relating to a Member State or a
or more Member States which has the purpose of
member of a federation, the competent authority of
mobilising funding and provide financial assistance to
that Member State;
the benefit of its members that are experiencing or
threatened by severe financing problems; or
(ii) in relation to sovereign debt of the Union or a credit
default swap relating to the Union, the competent
(vi) the European Investment Bank;
authority of the jurisdiction in which the department
issuing the debt is situated;
(e) ‘sovereign credit default swap’ means a credit default swap
where a payment or other benefit will be paid in the case
(iii) in relation to sovereign debt of several Member States
of a credit event or default relating to a sovereign issuer;
acting through a special purpose vehicle or a credit
default swap relating to such a special purpose vehicle,
the competent authority of the jurisdiction in which
the special purpose vehicle is established;
(f) ‘sovereign debt’ means a debt instrument issued by a
sovereign issuer;
(iv) in relation to sovereign debt of an international
financial institution established by two or more
(g) ‘issued sovereign debt’ means the total of sovereign debt
Member States, which has the purpose to mobilise
issued by a sovereign issuer that has not been redeemed;
funding and provide financial assistance to the
benefit of its members that are experiencing or
threatened by severe financing problems, the
(h) ‘issued share capital’ in relation to a company, means the
competent authority of the jurisdiction in which the
total of ordinary and any preference shares issued by the
international financial institution is established;
company but does not include convertible debt securities;
(v) in relation to a financial instrument other than an
(i) ‘home Member State’ means:
instrument referred to in points (i) to (iv), the
competent authority for that financial instrument as
defined in point (7) of Article 2 of Commission Regu
(i) in relation to an investment firm within the meaning
lation (EC) No 1287/2006 ( 2 ) and determined in
of point (1) of Article 4(1) of Directive 2004/39/EC, or
accordance with Chapter III of that Regulation;
to a regulated market within the meaning of point (14)
of Article 4(1) of Directive 2004/39/EC, the home
Member State within the meaning of point (20) of
(vi) in relation to a financial instrument that is not
Article 4(1) of Directive 2004/39/EC;
covered under points (i) to (v), the competent
authority of the Member State in which the financial
instrument was first admitted to trading on a trading
(ii) in relation to a credit institution, the home Member
venue;
State within the meaning of point (7) of Article 4 of
Directive 2006/48/EC of the European Parliament and
of the Council of 14 June 2006 relating to the taking
(vii) in relation to a debt instrument issued by the
up and pursuit of the business of credit institutions ( 1 );
European Investment Bank, the competent authority
of the Member State in which the European
Investment Bank is located;
(iii) in relation to a legal person not referred to in point (i)
or (ii), the Member State in which its registered office is
( 2 ) Commission Regulation (EC) No 1287/2006 of 10 August 2006
situated or, if it has no registered office, the Member
implementing Directive 2004/39/EC of the European Parliament
State in which its head office is situated;
and of the Council as regards record-keeping obligations for
investment firms, transaction reporting, market transparency,
admission of financial instruments to trading, and defined terms
( 1 ) OJ L 177, 30.6.2006, p. 1.
for the purposes of that Directive (OJ L 241, 2.9.2006, p. 1).

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24.3.2012 Official
Journal
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European
Union
L
86/9
(k) ‘market making activities’ means the activities of an
down in paragraph 1 of this Article, in particular specifying
investment firm, a credit institution, a third-country
when a natural or legal person is considered to own a
entity, or a firm as referred to in point (l) of Article 2(1)
financial instrument for the purposes of the definition of
of Directive 2004/39/EC, which is a member of a trading
short sale in point (b) of paragraph 1.
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)
Article 3
where it deals as principal in a financial instrument,
whether traded on or outside a trading venue, in any of
Short and long positions
the following capacities:
1. For
the
purposes
of
this
Regulation,
a
position
resulting
from either of the following shall be considered to be a short
position relating to issued share capital or issued sovereign debt:
(i) 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;
(a) a short sale of a share issued by a company or of a debt
instrument issued by a sovereign issuer;
(ii) as part of its usual business, by fulfilling orders
initiated by clients or in response to clients’ requests
(b) entering into a transaction which creates or relates to a
to trade;
financial instrument other than an instrument referred to
in point (a) where the effect or one of the effects of the
transaction is to confer a financial advantage on the natural
(iii) by hedging positions arising from the fulfilment of
or legal person entering into that transaction in the event of
tasks under points (i) and (ii);
a decrease in the price or value of the share or debt
instrument.
(l) ‘trading venue’ means a regulated market within the
meaning of point (14) of Article 4(1) of Directive
2. For
the
purposes
of
this
Regulation,
a
position
resulting
2004/39/EC, or a multilateral trading facility within the
from either of the following shall be considered to be a long
meaning of point (15) of Article 4(1) of Directive
position relating to issued share capital or issued sovereign debt:
2004/39/EC;
(m) ‘principal venue’ in relation to a share means the venue for
(a) holding a share issued by a company or a debt instrument
the trading of that share with the highest turnover;
issued by a sovereign issuer;
(n) ‘authorised primary dealer’ means a natural or legal person
(b) entering into a transaction which creates or relates to a
who has signed an agreement with a sovereign issuer or
financial instrument other than an instrument referred to
who has been formally recognised as a primary dealer by
in point (a) where the effect or one of the effects of the
or on behalf of a sovereign issuer and who, in accordance
transaction is to confer a financial advantage on the natural
with that agreement or recognition, has committed to
or legal person entering into that transaction in the event of
dealing as principal in connection with primary and
an increase in the price or value of the share or debt
secondary market operations relating to debt issued by
instrument.
that issuer;
3. For
the
purposes
of
paragraphs
1
and
2,
the
calculation
of
(o) ‘central counterparty’ means a legal entity which interposes
a short or a long position, in respect of any position held by the
itself between the counterparties to the contracts traded
relevant person indirectly, including through or by way of any
within one or more financial markets, becoming the
index, basket of securities or any interest in any exchange traded
buyer to every seller and the seller to every buyer and
fund or similar entity, shall be determined by the natural or
which is responsible for the operation of a clearing system;
legal person in question acting reasonably having regard to
publicly available information as to the composition of the
relevant index or basket of securities, or of the interests held
(p) ‘trading day’ means a trading day as referred to in Article 4
by the relevant exchange traded fund or similar entity. In calcu
of Regulation (EC) No 1287/2006;
lating such a short or long position, no person shall be required
to obtain any real-time information as to such composition
from any person.
(q) ‘turnover’ of a share means turnover within the meaning of
point (9) of Article 2 of Regulation (EC) No 1287/2006.
For the purposes of paragraphs 1 and 2 the calculation of a
short or long position relating to sovereign debt shall include
2. The
Commission
shall
be
empowered
to
adopt
delegated any sovereign credit default swap that relates to the sovereign
acts in accordance with Article 42 specifying the definitions laid
issuer.

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L 86/10
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Official Journal of the European Union
24.3.2012
4. For the purposes of this Regulation, the position
a sovereign credit default swap where the sovereign credit
remaining after deducting any long position that a natural or
default swap does not serve to hedge against:
legal person holds in relation to the issued share capital from
any short position that that natural or legal person holds in
relation to that capital shall be considered a net short position
in relation to the issued share capital of the company
(a) the risk of default of the issuer where the natural or legal
concerned.
person has a long position in the sovereign debt of that
issuer to which the sovereign credit default swap relates; or
5. For the purposes of this Regulation, the position
remaining after deducting any long position that a natural or
(b) the risk of a decline of the value of the sovereign debt
legal person holds in relation to issued sovereign debt and any
where the natural or legal person holds assets or is
long position in debt instruments of a sovereign issuer the
subject to liabilities, including but not limited to financial
pricing of which is highly correlated to the pricing of the
contracts, a portfolio of assets or financial obligations the
given sovereign debt from any short position that that natural
value of which is correlated to the value of the sovereign
or legal person holds in relation to the same sovereign debt
debt.
shall be considered a net short position in relation to the issued
sovereign debt of the sovereign issuer concerned.
2. The
Commission
shall
be
empowered
to
adopt
delegated
6. The
calculation
of
sovereign
debt
under
paragraphs
1
to
5 acts in accordance with Article 42 specifying, for the purposes
shall be for each single sovereign issuer even if separate entities
of paragraph 1 of this Article:
issue sovereign debt on behalf of the sovereign issuer.
(a) cases in which a sovereign credit default swap transaction is
7. The
Commission
shall
be
empowered
to
adopt
delegated
considered to be hedging against a default risk or the risk of
acts in accordance with Article 42 specifying:
a decline of the value of the sovereign debt, and the method
of calculation of an uncovered position in a sovereign credit
default swap;
(a) cases in which a natural or legal person is considered to
hold a share or debt instrument for the purposes of
paragraph 2;
(b) the method of calculating positions where different entities
in a group have long or short positions or for fund
management activities relating to separate funds.
(b) cases in which a natural or legal person has a net short
position for the purposes of paragraphs 4 and 5 and the
method of calculation of such position;
CHAPTER II
TRANSPARENCY OF NET SHORT POSITIONS
(c) the method of calculating positions for the purposes of
Article 5
paragraphs 3, 4 and 5 when different entities in a group
have long or short positions or for fund management
Notification to competent authorities of significant net
activities relating to separate funds.
short positions in shares
1. A natural or legal person who has a net short position in
relation to the issued share capital of a company that has shares
For the purposes of point (c) of the first subparagraph, the
admitted to trading on a trading venue shall notify the relevant
method of calculation shall take into account, in particular,
competent authority, in accordance with Article 9, where the
whether different investment strategies are pursued in relation
position reaches or falls below a relevant notification threshold
to a particular issuer through more than one separate fund
referred to in paragraph 2 of this Article.
managed by the same fund manager, whether the same
investment strategy is pursued in relation to a particular
issuer through more than one fund, and whether more than
one portfolio within the same entity is managed on a discre
2. A
relevant
notification
threshold
is
a
percentage
that
tionary basis pursuing the same investment strategy in relation
equals 0,2 % of the issued share capital of the company
to a particular issuer.
concerned and each 0,1 % above that.
Article 4
3. The
European
Supervisory
Authority
(European
Securities
Uncovered position in a sovereign credit default swap
and Markets Authority) (ESMA) may issue an opinion to the
Commission on adjusting the thresholds referred to in
1. For
the
purposes
of
this
Regulation,
a
natural
or
legal paragraph 2, taking into account the developments in
person shall be considered to have an uncovered position in
financial markets.

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EN
24.3.2012 Official
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European
Union L
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4. The
Commission
shall
be
empowered
to
adopt
delegated 3. The
Commission
shall
be
empowered
to
adopt
delegated
acts in accordance with Article 42 modifying the thresholds
acts in accordance with Article 42 specifying the amounts and
referred to in paragraph 2 of this Article, taking into account
incremental levels referred to in paragraph 2 of this Article.
the developments in financial markets.
The Commission shall:
Article 6
Public disclosure of significant net short positions in shares
(a) ensure that the thresholds are not set at such a level as to
1. A natural or legal person who has a net short position in
require notification of positions which are of minimal value;
relation to the issued share capital of a company that has shares
admitted to trading on a trading venue shall disclose details of
that position to the public, in accordance with Article 9, where
(b) take into account the total amount of outstanding issued
the position reaches or falls below a relevant publication
sovereign debt for each sovereign issuer, and the average
threshold referred to in paragraph 2 of this Article.
size of positions held by market participants relating to the
sovereign debt of that sovereign issuer; and
2. A
relevant
publication
threshold
is
a
percentage
that
equals 0,5 % of the issued share capital of the company
(c) take into account the liquidity of each sovereign bond
concerned and each 0,1 % above that.
market.
3. ESMA
may
issue
an
opinion
to
the
Commission
on
Article 8
adjusting the thresholds referred to in paragraph 2, taking
Notification to competent authorities of uncovered
into account the developments in financial markets.
positions in sovereign credit default swaps
Where a competent authority suspends restrictions in
4. The
Commission
shall
be
empowered
to
adopt
delegated accordance with Article 14(2), a natural or legal person who
acts in accordance with Article 42 modifying the thresholds
has an uncovered position in a sovereign credit default swap
referred to in paragraph 2 of this Article, taking into account
shall notify the relevant competent authority where such a
the developments in financial markets.
position reaches or falls below the relevant notification
thresholds for the sovereign issuer, as specified in accordance
with Article 7.
5. This
Article
is
without
prejudice
to
laws,
regulations
and
administrative provisions adopted in relation to takeover bids,
merger transactions and other transactions affecting the
Article 9
ownership or control of companies regulated by the supervisory
Method of notification and disclosure
authorities appointed by Member States pursuant to Article 4 of
Directive 2004/25/EC of the European Parliament and of the
1. Any notification or disclosure under Article 5, 6, 7 or 8
Council of 21 April 2004 on takeover bids (
shall set out details of the identity of the natural or legal person

1 ) that require
disclosure of short positions beyond the requirements of this
who holds the relevant position, the size of the relevant
Article.
position, the issuer in relation to which the relevant position
is held and the date on which the relevant position was created,
changed or ceased to be held.
Article 7
Notification to competent authorities of significant net
For the purposes of Articles 5, 6, 7 and 8, natural and legal
short positions in sovereign debt
persons that hold significant net short positions shall keep, for a
period of 5 years, records of the gross positions which make a
1. A
natural
or
legal
person
who
has
a
net
short
position significant net short position.
relating to issued sovereign debt shall notify the relevant
competent authority, in accordance with Article 9, where such
a position reaches or falls below the relevant notification
thresholds for the sovereign issuer concerned.
2. The
relevant
time
for
calculation
of
a
net
short
position
shall be at midnight at the end of the trading day on which the
natural or legal person holds the relevant position. That time
shall apply to all transactions irrespective of the means of
2. The
relevant
notification
thresholds
shall
consist
of
an trading used, including transactions executed through manual
initial amount and then additional incremental levels in
or automated trading, and irrespective of whether the trans
relation to each sovereign issuer, as specified in the measures
actions have taken place during normal trading hours. The
taken by the Commission in accordance with paragraph 3.
notification or disclosure shall be made not later than at
ESMA shall publish on its website the notification thresholds
15.30 on the following trading day. The times specified in
for each Member State.
this paragraph shall be calculated according to the time in the
Member State of the relevant competent authority to whom the
( 1 ) OJ L 142, 30.4.2004, p. 12.
relevant position must be notified.

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L 86/12
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Official Journal of the European Union
24.3.2012
3. The
notification
of
information
to
a
relevant
competent sovereign credit default swaps, for which it is the relevant
authority shall ensure the confidentiality of the information and
competent authority and receives notifications under Articles
incorporate mechanisms for authenticating the source of the
5, 7 and 8.
notification.
2. ESMA
may
request
at
any
time,
in
order
to
carry
out
its
4. The
public
disclosure
of
information
set
out
in
Article
6 duties under this Regulation, additional information from a
shall be made in a manner ensuring fast access to information
relevant competent authority on net short positions relating
on a non-discriminatory basis. That information shall be posted
to issued share capital and to issued sovereign debt, or on
on a central website operated or supervised by the relevant
uncovered positions relating to sovereign credit default swaps.
competent authority. The competent authorities shall
communicate the address of that website to ESMA, which, in
turn, shall put a link to all such central websites on its own
The competent authority shall provide the requested
website.
information to ESMA at the latest within 7 calendar days.
Where there are adverse events or developments which
constitute a serious threat to financial stability or to market
confidence in the Member State concerned or in another
5. In
order
to
ensure
consistent
application
of
this
Article, Member State, the competent authority shall provide ESMA
ESMA shall develop draft regulatory technical standards spec
with any available information based on the notification
ifying the details of the information to be provided for the
requirements under Articles 5, 7 and 8 within 24 hours.
purposes of paragraph 1.
3. In
order
to
ensure
consistent
application
of
this
Article,
ESMA shall submit those draft regulatory technical standards to
ESMA shall develop draft regulatory technical standards spec
the Commission by 31 March 2012.
ifying the details of the information to be provided in
accordance with paragraphs 1 and 2.
Power is delegated to the Commission to adopt the regulatory
ESMA shall submit those draft regulatory technical standards to
technical standards referred to in the first subparagraph in
the Commission by 31 March 2012.
accordance with Articles 10 to 14 of Regulation (EU)
No 1095/2010.
Power is delegated to the Commission to adopt the regulatory
technical standards referred to in the first subparagraph in
6. In
order
to
ensure
uniform
conditions
of
application
of accordance with Articles 10 to 14 of Regulation (EU)
paragraph 4, ESMA shall develop draft implementing technical
No 1095/2010.
standards specifying the means by which information may be
disclosed to the public.
4. In
order
to
ensure
uniform
conditions
of
application
of
paragraph 1, ESMA shall develop draft implementing technical
standards defining the format of information to be provided in
ESMA shall submit those draft implementing technical standards
accordance with paragraphs 1 and 2.
to the Commission by 31 March 2012.
ESMA shall submit those draft implementing technical standards
Power is conferred on the Commission to adopt the imple
to the Commission by 31 March 2012.
menting technical standards referred to in the first subparagraph
in accordance with Article 15 of Regulation (EU)
No 1095/2010.
Power is conferred on the Commission to adopt the imple
menting technical standards referred to in the first subparagraph
in accordance with Article 15 of Regulation (EU)
Article 10
No 1095/2010.
Application of notification and disclosure requirements
CHAPTER III
The notification and disclosure requirements under Articles 5, 6,
7 and 8 apply to natural or legal persons domiciled or estab
UNCOVERED SHORT SALES
lished within the Union or in a third country.
Article 12
Restrictions on uncovered short sales in shares
Article 11
1. A natural or legal person may enter into a short sale of a
Information to be provided to ESMA
share admitted to trading on a trading venue only where one of
the following conditions is fulfilled:
1. The
competent
authorities
shall
provide
information
in
summary form to ESMA on a quarterly basis on net short
positions relating to issued share capital and to issued
(a) the natural or legal person has borrowed the share or has
sovereign debt, and on uncovered positions relating to
made alternative provisions resulting in a similar legal effect;

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EN
24.3.2012 Official
Journal
of
the
European
Union L
86/13
(b) the natural or legal person has entered into an agreement to
issuer, the pricing of which has a high correlation with the
borrow the share or has another absolutely enforceable
pricing of the given sovereign debt.
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;
3. Where
the
liquidity
of
sovereign
debt
falls
below
the
threshold determined in accordance with the methodology
referred to in paragraph 4, the restrictions referred to in
(c) the natural or legal person has an arrangement with a third
paragraph 1 may be temporarily suspended by the relevant
party under which that third party has confirmed that the
competent authority. Before suspending those restrictions, the
share has been located and has taken measures vis-à-vis
relevant competent authority shall notify ESMA and the other
third parties necessary for the natural or legal person to
competent authorities about the proposed suspension.
have a reasonable expectation that settlement can be
effected when it is due.
A suspension shall be valid for an initial period not exceeding
2. In
order
to
ensure
uniform
conditions
of
application
of 6 months from the date of its publication on the website of the
paragraph 1, ESMA shall develop draft implementing technical
relevant competent authority. The suspension may be renewed
standards to determine the types of agreements, arrangements
for periods not exceeding 6 months if the grounds for the
and measures that adequately ensure that the share will be
suspension continue to apply. If the suspension is not
available for settlement. In determining what measures are
renewed by the end of the initial period or of any subsequent
necessary to have a reasonable expectation that settlement can
renewal period it shall automatically expire.
be effected when it is due, ESMA shall take into account, inter
alia, the intraday trading and the liquidity of the shares.
ESMA shall, within 24 hours of notification by the relevant
competent authority, issue an opinion based on paragraph
ESMA shall submit those draft implementing technical standards
4 on the notified suspension or renewal of suspension. The
to the Commission by 31 March 2012.
opinion shall be published on ESMA’s website.
Power is conferred on the Commission to adopt the imple
4. The
Commission
shall
adopt
delegated
acts
in
accordance
menting technical standards referred to in the first subparagraph
with Article 42 specifying the parameters and methods for
in accordance with Article 15 of Regulation (EU)
calculating the threshold of liquidity referred to in paragraph
No 1095/2010.
3 of this Article in relation to issued sovereign debt.
Article 13
The parameters and methods for Member States to calculate the
Restrictions on uncovered short sales in sovereign debt
threshold shall be set in such a way that where it is reached, it
represents a significant decline relative to the average level of
1. A natural or legal person may enter into a short sale of
liquidity for the sovereign debt concerned.
sovereign debt only where one of the following conditions is
fulfilled:
The threshold shall be defined based on objective criteria
specific to the relevant sovereign debt market, including the
(a) the natural or legal person has borrowed the sovereign debt
total amount of outstanding issued sovereign debt for each
or has made alternative provisions resulting in a similar
sovereign issuer.
legal effect;
(b) the natural or legal person has entered into an agreement to
5. In
order
to
ensure
uniform
conditions
of
application
of
borrow the sovereign debt or has another absolutely
paragraph 1, ESMA may develop draft implementing technical
enforceable claim under contract or property law to be
standards to determine the types of agreements or arrangements
transferred ownership of a corresponding number of
that adequately ensure that the sovereign debt will be available
securities of the same class so that settlement can be
for settlement. ESMA shall, in particular, take into account the
effected when it is due;
need to preserve liquidity of markets, especially sovereign bond
and sovereign bond repurchase markets.
(c) the natural or legal person has an arrangement with a third
party under which that third party has confirmed that the
ESMA shall submit those draft implementing technical standards
sovereign debt has been located or otherwise has a
to the Commission by 31 March 2012.
reasonable expectation that settlement can be effected
when it is due.
Power is conferred on the Commission to adopt the imple
menting technical standards referred to in the first subparagraph
2. The
restrictions
in
paragraph
1
do
not
apply
if
the
trans
in accordance with Article 15 of Regulation (EU)
action serves to hedge a long position in debt instruments of an
No 1095/2010.

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L 86/14
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Official Journal of the European Union
24.3.2012
Article 14
suspension or renewal of a suspension is based on the second
subparagraph, that opinion shall also include an assessment of
Restrictions on uncovered sovereign credit default swaps
the indicators used by the competent authority. The opinion
1. A
natural
or
legal
person
may
enter
into
sovereign
credit shall be published on ESMA’s website.
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.
Article 15
Buy-in procedures
2. A competent authority may temporarily suspend 1. A
central
counterparty
in
a
Member
State
that
provides
restrictions referred to in paragraph 1, where it has objective
clearing services for shares shall ensure that procedures are in
grounds for believing that its sovereign debt market is not
place which comply with all of the following requirements:
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 sovereign
issuers or affecting the sovereign issuers’ ability to issue new
(a) where a natural or legal person who sells shares is not able
debt. Those grounds shall be based on the following indicators:
to deliver the shares for settlement within four business
days after the day on which settlement is due, procedures
are automatically triggered for the buy-in of the shares to
ensure delivery for settlement;
(a) a high or rising interest rate on the sovereign debt;
(b) a widening of interest rate spreads on the sovereign debt
(b) where the buy-in of the shares for delivery is not possible,
compared to the sovereign debt of other sovereign issuers;
an amount is paid to the buyer based on the value of the
shares to be delivered at the delivery date plus an amount
for losses incurred by the buyer as a result of the settlement
failure; and
(c) a widening of the sovereign credit default swap spreads
compared to the own curve and compared to other
sovereign issuers;
(c) the natural or legal person who fails to settle reimburses all
amounts paid pursuant to points (a) and (b).
(d) the timeliness of the return of the price of the sovereign
debt to its original equilibrium after a large trade;
2. A
central
counterparty
in
a
Member
State
that
provides
clearing services for shares shall ensure that procedures are in
place, which ensure that where a natural or legal person who
(e) the amounts of sovereign debt that can be traded.
sells shares fails to deliver the shares for settlement by the date
on which settlement is due, such person must make daily
payments for each day that the failure continues.
The competent authority may also use indicators other than
those set out in points (a) to (e) of the first subparagraph.
The daily payments shall be sufficiently high to act as a
deterrent to natural or legal persons failing to settle.
Before suspending restrictions under this Article, the relevant
competent authority shall notify ESMA and the other
competent authorities of the proposed suspension and the
grounds on which it is based.
CHAPTER IV
EXEMPTIONS
A suspension shall be valid for an initial period not exceeding
Article 16
12 months from the date of its publication on the website of
Exemption where the principal trading venue is in a third
the relevant competent authority. The suspension may be
country
renewed for periods not exceeding 6 months if the grounds
for the suspension continue to apply. If the suspension is not
1. Articles 5, 6, 12 and 15 shall not apply to shares of a
renewed by the end of the initial period or of any subsequent
company admitted to trading on a trading venue in the Union
renewal period, it shall automatically expire.
where the principal venue for the trading of the shares is
located in a third country.
ESMA shall, within 24 hours of the notification by the relevant
competent authority, issue an opinion on the intended
2. The
relevant
competent
authority
for
shares
of
a
company
suspension or on the renewal of that suspension, irrespective
that are traded on a trading venue in the Union and a venue
of whether the competent authority has based the suspension
located in a third country shall determine, at least every 2 years,
on the indicators set out in points (a) to (e) of the first
whether the principal venue for the trading of those shares is
subparagraph or on other indicators. Where the intended
located in a third country.

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EN
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European
Union L
86/15
The relevant competent authority shall notify ESMA of any such
Council of 28 January 2003 on insider dealing and market
shares identified as having their principal trading venue located
manipulation (market abuse)
( 1 ) and under Directive
in a third country.
2004/109/EC of the European Parliament and of the Council
of 15 December 2004 on the harmonisation of transparency
requirements in relation to information about issuers whose
Every 2 years ESMA shall publish the list of shares for which
securities are admitted to trading on a regulated market (
the principal trading venue is located in a third country. The list

2 ),
and which are subject to effective supervision and enforcement
shall be effective for a 2-year period.
in that third country.
3. In
order
to
ensure
consistent
application
of
this
Article,
ESMA shall develop draft regulatory technical standards spec
The legal and supervisory framework of a third country may be
ifying the method for calculation of the turnover to determine
considered equivalent where that third country’s:
the principal venue for the trading of a share.
ESMA shall submit those draft regulatory technical standards to
(a) markets are subject to authorisation and to effective super
the Commission by 31 March 2012.
vision and enforcement on an ongoing basis;
Power is delegated to the Commission to adopt the regulatory
technical standards referred to in the first subparagraph in
(b) markets have clear and transparent rules regarding
accordance with Articles 10 to 14 of Regulation (EU)
admission of securities to trading so that such securities
No 1095/2010.
are capable of being traded in a fair, orderly and efficient
manner, and are freely negotiable;
4. In
order
to
ensure
uniform
conditions
of
application
of
paragraphs 1 and 2 ESMA shall develop draft implementing
technical standards to determine:
(c) security issuers are subject to periodic and ongoing
information requirements ensuring a high level of investor
(a) the date on which and period in respect of which any
protection; and
calculation determining the principal trading venue for a
share is to be made;
(d) market transparency and integrity are ensured by preventing
(b) the date by which the relevant competent authority shall
market abuse in the form of insider dealing and market
notify ESMA of those shares for which the principal trading
manipulation.
venue is in a third country;
(c) the date from which the list is to be effective following
3. Articles
7,
13
and
14
shall
not
apply
to
the
activities
of
a
publication by ESMA.
natural or legal person where, acting as an authorised primary
dealer pursuant to an agreement with a sovereign issuer, it is
dealing as principal in a financial instrument in relation to
ESMA shall submit those draft implementing technical standards
primary or secondary market operations relating to the
to the Commission by 31 March 2012.
sovereign debt.
Power is conferred on the Commission to adopt the imple
menting technical standards referred to in the first subparagraph
4. Articles 5, 6, 12, 13 and 14 of this Regulation shall not
in accordance with Article 15 of Regulation (EU)
apply to a natural or legal person where it enters into a short
No 1095/2010.
sale of a security or has a net short position in relation to the
carrying out of a stabilisation under Chapter III of Commission
Regulation (EC) No 2273/2003 of 22 December 2003 imple
Article 17
menting Directive 2003/6/EC of the European Parliament and
Exemption for market making activities and primary
of the Council as regards exemptions for buy-back programmes
market operations
and stabilisation of financial instruments ( 3 ).
1. Articles 5, 6, 7, 12, 13 and 14 shall not apply to trans
actions performed due to market making activities.
5. The
exemption
referred
to
in
paragraph
1
shall
apply
only
where the natural or legal person concerned has notified the
2. The
Commission
may,
in
accordance
with
the
procedure competent authority of its home Member State in writing that it
referred to in Article 44(2), adopt decisions determining that the
intends to make use of the exemption. The notification shall be
legal and supervisory framework of a third country ensures that
made not less than 30 calendar days before the natural or legal
a market authorised in that third country complies with legally
person first intends to use the exemption.
binding requirements which are, for the purpose of the appli
cation of the exemption set out in paragraph 1, equivalent to
( 1 ) OJ L 96, 12.4.2003, p. 16.
the requirements under Title III of Directive 2004/39/EC, under
( 2 ) OJ L 390, 31.12.2004, p. 38.
Directive 2003/6/EC of the European Parliament and of the
( 3 ) OJ L 336, 23.12.2003, p. 33.

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L 86/16
EN
Official Journal of the European Union
24.3.2012
6. The
exemption
referred
to
in
paragraph
3
shall
apply
only 14. A
notification
under
this
Article
may
be
made
by
a
where the authorised primary dealer has notified the relevant
person to a competent authority and by a competent
competent authority in relation to the sovereign debt concerned
authority to ESMA at any time within 60 calendar days
in writing that it intends to make use of the exemption. The
before 1 November 2012.
notification shall be made not less than 30 calendar days before
the natural or legal person acting as authorised primary dealer
first intends to use the exemption.
CHAPTER V
POWERS OF INTERVENTION OF COMPETENT AUTHORITIES
7. The
competent
authority
referred
to
in
paragraphs
5
and
AND OF ESMA
6 may prohibit the use of the exemption if it considers that the
SECTION 1
natural or legal person does not satisfy the conditions of the
exemption. Any prohibition shall be imposed within the 30
Powers of competent authorities
calendar day period referred to in paragraph 5 or 6 or
Article 18
subsequently if the competent authority becomes aware that
there have been changes in the circumstances of the natural
Notification and disclosure in exceptional circumstances
or legal person so that it no longer satisfies the conditions of
the exemption.
1. Subject
to
Article
22,
a
competent
authority
may
require
natural or legal persons who have net short positions in relation
to a specific financial instrument or class of financial
instruments to notify it or to disclose to the public details of
8. A
third-country
entity
that
is
not
authorised
in
the
Union
the position where the position reaches or falls below a notifi
shall send the notification referred to in paragraphs 5 and 6 to
cation threshold fixed by the competent authority and where:
the competent authority of the main trading venue in the Union
in which it trades.
(a) there are adverse events or developments which constitute a
serious threat to financial stability or to market confidence
9. A
natural
or
legal
person
who
has
given
a
notification
in the Member State concerned or in one or more other
under paragraph 5 shall as soon as possible notify in writing
Member States; and
the competent authority of its home Member State where there
are any changes affecting that person’s eligibility to use the
exemption, or if it no longer wishes to use the exemption.
(b) the measure is necessary to address the threat and will not
have a detrimental effect on the efficiency of financial
markets which is disproportionate to its benefits.
10. A natural or legal person who has given a notification
under paragraph 6 shall as soon as possible notify in writing
the relevant competent authority in relation to sovereign debt
concerned where there are any changes affecting that person’s
2. Paragraph
1
of
this
Article
shall
not
apply
to
financial
eligibility to use the exemption, or if it no longer wishes to use
instruments in respect of which transparency is already
the exemption.
required under Articles 5 to 8. A measure under paragraph 1
may apply in circumstances or be subject to exceptions
specified by the competent authority. Exceptions may in
particular be specified to apply to market making activities
11. The
competent
authority
of
the
home
Member
State
may and primary market activities.
request information, in writing, from a natural or legal person
operating under the exemptions set out in paragraph 1, 3 or 4
about short positions held or activities conducted under the
exemption. The natural or legal person shall provide the
Article 19
information not later than 4 calendar days after the request is
Notification by lenders in exceptional circumstances
made.
1. Subject
to
Article
22,
a
competent
authority
may
take
the
measure referred to in paragraph 2 of this Article where:
12. A
competent
authority
shall
notify
ESMA
within
2
weeks
of notification in accordance with paragraph 5 or 9 of any
market makers and in accordance with paragraph 6 or 10 of
(a) there are adverse events or developments which constitute a
any authorised primary dealers who are making use of the
serious threat to financial stability or to market confidence
exemption and of any market makers and authorised primary
in the Member State concerned or in one or more other
dealers who are no longer making use of the exemption.
Member States; and
13. ESMA
shall
publish
and
keep
up
to
date
on
its
website
a (b) the measure is necessary to address the threat and will not
list of market makers and authorised primary dealers who are
have a detrimental effect on the efficiency of financial
using the exemption.
markets which is disproportionate to its benefits.

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EN
24.3.2012 Official
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of
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European
Union L
86/17
2. A competent authority may require natural or legal
in the Member State concerned or in one or more other
persons engaged in the lending of a specific financial instrument
Member States; and
or class of financial instruments to notify any significant change
in the fees requested for such lending.
(b) the measure is necessary to address the threat and will not
have a detrimental effect on the efficiency of financial
Article 20
markets which is disproportionate to its benefits.
Restrictions on short selling and similar transactions in
exceptional circumstances
2. A
measure
taken
under
paragraph
1
may
apply
to
1. Subject
to
Article
22,
a
competent
authority
may
take
one sovereign credit default swap transactions of a specific class
or more of the measures referred to in paragraph 2 of this
or to specific sovereign credit default swap transactions. The
Article where:
measure may apply in circumstances or be subject to exceptions
specified by the competent authority. Exceptions may in
particular be specified to apply to market making activities
(a) there are adverse events or developments which constitute a
and primary market activities.
serious threat to financial stability or to market confidence
in the Member State concerned or in one or more other
Member States; and
Article 22
Measures by other competent authorities
(b) the measure is necessary to address the threat and will not
Without prejudice to Article 26, a competent authority in
have a detrimental effect on the efficiency of financial
relation to a financial instrument for which it is not the
markets which is disproportionate to its benefits.
relevant competent authority may impose or renew a measure
under Article 18, 19, 20 or 21 only with the consent of the
relevant competent authority.
2. A
competent
authority
may
prohibit
or
impose
conditions
relating to natural or legal persons entering into:
Article 23
Power to restrict short selling of financial instruments
(a) a short sale; or
temporarily in the case of a significant fall in price
1. Where
the
price
of
a
financial
instrument
on
a
trading
(b) a transaction other than a short sale which creates, or
venue has fallen significantly during a single trading day in
relates to, a financial instrument and the effect or one of
relation to the closing price on that venue on the previous
the effects of that transaction is to confer a financial
trading day, the competent authority of the home Member
advantage on the natural or legal person in the event of a
State for that venue shall consider whether it is appropriate
decrease in the price or value of another financial
to prohibit or restrict natural or legal persons from engaging
instrument.
in short selling of the financial instrument on that trading venue
or otherwise limit transactions in that financial instrument on
that trading venue in order to prevent a disorderly decline in
the price of the financial instrument.
3. A
measure
taken
under
paragraph
2
may
apply
to
trans
actions concerning all financial instruments, financial
instruments of a specific class or a specific financial instrument.
The measure may apply in circumstances or be subject to
Where the competent authority is satisfied under the first
exceptions specified by the competent authority. Exceptions
subparagraph that it is appropriate to do so, it shall in the
may in particular be specified to apply to market making
case of a share or a debt instrument, prohibit or restrict
activities and primary market activities.
natural and legal persons from entering into a short sale on
that trading venue or in the case of another type of financial
instrument, limit transactions in that financial instrument on
that trading venue in order to prevent a disorderly decline in
Article 21
the price of the financial instrument.
Restrictions on sovereign credit default swap transactions
in exceptional circumstances
2. The
measure
under
paragraph
1
shall
apply
for
a
period
1. Subject
to
Article
22,
a
competent
authority
may
restrict not exceeding the end of the trading day following the trading
the ability of natural or legal persons to enter into sovereign
day on which the fall in price occurs. If, at the end of the
credit default swap transactions or may limit the value of
trading day following the trading day on which the fall in
sovereign credit default swap positions that those persons are
price occurs, there is, despite the measure being imposed, a
permitted to enter into where:
further significant fall in value of at least half of the amount
specified in paragraph 5 of the financial instrument from the
closing price of the first trading day, the competent authority
(a) there are adverse events or developments which constitute a
may extend the measure for a further period not exceeding 2
serious threat to financial stability or to market confidence
trading days after the end of the second trading day.

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L 86/18
EN
Official Journal of the European Union
24.3.2012
3. The measure under paragraph 1 shall apply in circum
ESMA shall submit those draft regulatory technical standards to
stances or be subject to exceptions specified by the competent
the Commission by 31 March 2012.
authority. Exceptions may in particular be specified to apply to
market making activities and primary market activities.
Power is delegated to the Commission to adopt the regulatory
technical standards referred to in the first subparagraph in
4. A competent authority of the home Member State of a
accordance with Articles 10 to 14 of Regulation (EU)
venue where a financial instrument has during a single trading
No 1095/2010.
day fallen by the value referred to in paragraph 5 shall notify
ESMA about the decision taken under paragraph 1 at the latest
2 hours after the end of that trading day. ESMA shall
Article 24
immediately inform the competent authorities of the home
Period of restrictions
Member States of venues which trade the same financial
instrument.
A measure imposed under Article 18, 19, 20 or 21 shall be
valid for an initial period not exceeding 3 months from the date
of publication of the notice referred to in Article 25.
If a competent authority disagrees with the action taken by
another competent authority on a financial instrument traded
The measure may be renewed for further periods not exceeding
on different venues regulated by different competent authorities,
3 months if the grounds for taking the measure continue to
ESMA may assist those authorities in reaching an agreement in
apply. If the measure is not renewed by the end of such a
accordance with Article 19 of Regulation (EU) No 1095/2010.
3-month period, it shall automatically expire.
The conciliation shall be completed before midnight at the end
Article 25
of the same trading day. If the competent authorities concerned
fail to reach an agreement within the conciliation phase, ESMA
Notice of restrictions
may take a decision in accordance with Article 19(3) of Regu
1. A
competent
authority
shall
publish
on
its
website
notice
lation (EU) No 1095/2010. The decision shall be taken before
of any decision to impose or renew any measure referred to in
the opening of the next trading day.
Articles 18 to 23.
5. The fall in value shall be 10 % or more in the case of a
2. The
notice
shall
specify
at
least
details
of:
liquid share, as defined in Article 22 of Regulation (EC)
No 1287/2006, and for illiquid shares and other classes of
financial instruments an amount to be specified by the
(a) the measures imposed including the instruments and classes
Commission.
of transactions to which they apply and their duration;
(b) the reasons why the competent authority believes it is
6. ESMA
may
issue
and
send
to
the
Commission
an
opinion
necessary to impose the measures including the evidence
on adjusting the threshold referred to in paragraph 5, taking
supporting those reasons.
into account the developments in financial markets.
3. A measure under Articles 18 to 23 shall take effect when
The Commission shall be empowered to adopt delegated acts in
the notice is published or at a time specified in the notice that is
accordance with Article 42 modifying the thresholds referred to
after its publication and shall only apply in relation to a trans
in paragraph 5 of this Article, taking into account the devel
action entered into after the measure takes effect.
opments in financial markets.
Article 26
7. The
Commission
shall
adopt
delegated
acts
in
accordance
Notification to ESMA and other competent authorities
with Article 42 specifying what constitutes a significant fall in
value for financial instruments other than liquid shares, taking
1. Before imposing or renewing any measure under
into account the specificities of each class of financial
Article 18, 19, 20 or 21 and before imposing any restriction
instrument and the differences of volatility.
under Article 23, a competent authority shall notify ESMA and
the other competent authorities of the measure it proposes.
8. In
order
to
ensure
consistent
application
of
this
Article, 2. The notification shall include details of the proposed
ESMA shall develop draft regulatory technical standards spec
measures, the classes of financial instruments and transactions
ifying the method of calculation of the 10 % fall for liquid
to which they will apply, the evidence supporting the reasons
shares and of the fall in value specified by the Commission as
for those measures and when the measures are intended to take
referred to in paragraph 7.
effect.

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EN
24.3.2012 Official
Journal
of
the
European
Union L
86/19
3. Notification of a proposal to impose or renew a measure
4. ESMA
shall
review
measures
under
this
Article
regularly
under Article 18, 19, 20 or 21 shall be made not less than
and in any event at least every 3 months. If the measure is not
24 hours before the measure is intended to take effect or to be
renewed by the end of such a 3-month period, it shall auto
renewed. In exceptional circumstances, a competent authority
matically expire.
may make the notification less than 24 hours before the
measure is intended to take effect where it is not possible to
give 24 hours notice. A notification of a restriction under
Article 23 shall be made before the measure is intended to
Article 28
take effect.
ESMA intervention powers in exceptional circumstances
1. In
accordance
with
Article
9(5)
of
Regulation
(EU)
No 1095/2010, ESMA shall, subject to paragraph 2 of this
4. A
competent
authority
that
receives
notification
under
this Article, either:
Article may take measures in accordance with Articles 18 to 23
in that Member State where it is satisfied that the measure is
necessary to assist the competent authority making the notifi
(a) require natural or legal persons who have net short
cation. The competent authority that receives notification shall
positions in relation to a specific financial instrument or
also give notice in accordance with paragraphs 1 to 3 where it
class of financial instruments to notify a competent
proposes to take measures.
authority or to disclose to the public details of any such
position; or
SECTION 2
(b) prohibit or impose conditions on, the entry by natural or
Powers of ESMA
legal persons into a short sale or a transaction which
creates, or relates to, a financial instrument other than
Article 27
financial instruments referred to in point (c) of Article 1(1)
Coordination by ESMA
where the effect or one of the effects of the transaction is to
confer a financial advantage on such person in the event of
1. ESMA
shall
perform
a
facilitation
and
coordination
role
in
a decrease in the price or value of another financial
relation to measures taken by the competent authorities under
instrument.
Section 1. In particular ESMA shall ensure that a consistent
approach is taken by competent authorities regarding
measures taken, especially regarding where it is necessary to
use powers of intervention, the nature of any measures
A measure may apply in particular circumstances, or be subject
imposed and the commencement and duration of such
to exceptions specified by ESMA. Exceptions may in particular
measures.
be specified to apply to market-making activities and primary
market activities.
2. After
receiving
notification
under
Article
26
of
any 2. ESMA
shall
take
a
decision
under
paragraph
1
only
if:
measure that is to be imposed or renewed under Article 18,
19, 20 or 21, ESMA shall within 24 hours issue an opinion on
whether it considers the measure or proposed measure is
necessary to address the exceptional circumstances. The
(a) the measures listed in points (a) and (b) of paragraph 1
opinion shall state whether ESMA considers that adverse
address a threat to the orderly functioning and integrity
events or developments have arisen which constitute a serious
of financial markets or to the stability of the whole or
threat to financial stability or to market confidence in one or
part of the financial system in the Union and there are
more Member States, whether the measure or proposed measure
cross-border implications; and
is appropriate and proportionate to address the threat and
whether the proposed duration of any such measure is justified.
If ESMA considers that the taking of any measure by the other
(b) no competent authority has taken measures to address the
competent authorities is necessary to address the threat, it shall
threat or one or more of the competent authorities have
also state this in its opinion. The opinion shall be published on
taken measures that do not adequately address the threat.
ESMA’s website.
3. Where
taking
measures
referred
to
in
paragraph
1
ESMA
shall take into account the extent to which the measure:
3. Where a competent authority proposes to take or takes
measures contrary to an ESMA opinion under paragraph 2 or
declines to take measures contrary to an ESMA opinion under
that paragraph, it shall publish on its website within 24 hours
(a) significantly addresses the threat to the orderly functioning
of receiving ESMA’s opinion a notice fully explaining its reasons
and integrity of financial markets or to the stability of the
for doing so. Where such a situation arises ESMA shall consider
whole or part of the financial system in the Union or
whether the conditions are satisfied and it is an appropriate case
significantly improves the ability of the competent auth
for the use of its powers of intervention under Article 28.
orities to monitor the threat;

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L 86/20
EN
Official Journal of the European Union
24.3.2012
(b) does not create a risk of regulatory arbitrage;
11. A
measure
adopted
by
ESMA
under
this
Article
shall
prevail over any previous measure taken by a competent
authority under Section 1.
(c) does not have a detrimental effect on the efficiency of
financial markets, including by reducing liquidity in those
markets or creating uncertainty for market participants, that
Article 29
is disproportionate to the benefits of the measure.
ESMA’s powers in emergency situations relating to
sovereign debt
Where one or more competent authorities have taken a
measure under Article 18, 19, 20 or 21, ESMA may take any
In the case of an emergency situation relating to sovereign debt
of the measures referred to in paragraph 1 of this Article
or sovereign credit default swaps, Articles 18 and 38 of Regu
without issuing the opinion provided for in Article 27.
lation (EU) No 1095/2010 shall apply.
4. Before
deciding
to
impose
or
renew
any
measure
referred
Article 30
to in paragraph 1, ESMA shall consult the ESRB and, where
Further specification of adverse events or developments
appropriate, other relevant authorities.
The Commission shall be empowered to adopt delegated acts in
accordance with Article 42 specifying criteria and factors to be
5. Before
deciding
to
impose
or
renew
any
measure
referred taken into account by the competent authorities and by ESMA
to in paragraph 1, ESMA shall notify the competent authorities
in determining in which cases the adverse events or devel
concerned of the measure it proposes to take. The notification
opments referred to in Articles 18 to 21 and Article 27 and
shall include details of the proposed measures, the class of
the threats referred to in point (a) of Article 28(2) arise.
financial instruments and transactions to which they will
apply, the evidence supporting the reasons for those measures
and when the measures are intended to take effect.
Article 31
Inquiries by ESMA
6. The
notification
shall
be
made
not
less
than
24
hours ESMA may, on the request of one or more of the competent
before the measure is to take effect or to be renewed. In excep
authorities, the European Parliament, the Council or the
tional circumstances, ESMA may make the notification less than
Commission or on its own initiative conduct an inquiry into
24 hours before the measure is intended to take effect where it
a particular issue or practice relating to short selling or relating
is not possible to give 24 hours’ notice.
to the use of credit default swaps to assess whether that issue or
practice poses any potential threat to financial stability or
market confidence in the Union.
7. ESMA shall publish on its website notice of any decision
to impose or renew any measure referred to in paragraph 1.
The notice shall at least specify:
ESMA shall publish a report setting out its findings and any
recommendations relating to the issue or practice within
(a) the measures imposed including the instruments and classes
3 months as from the end of any such inquiry.
of transactions to which they apply, and their duration; and
CHAPTER VI
(b) the reasons why ESMA is of the opinion that it is necessary
to impose the measures including the evidence supporting
ROLE OF COMPETENT AUTHORITIES
those reasons.
Article 32
Competent authorities
8. After
deciding
to
impose
or
renew
any
measure
referred Each Member State shall designate one or more of the
to in paragraph 1, ESMA shall immediately notify the
competent authorities for the purpose of this Regulation.
competent authorities of the measures taken.
9. A measure shall take effect when the notice is published
Where a Member State designates more than one competent
on the ESMA website or at a time specified in the notice that is
authority, it shall clearly determine their respective roles and it
after its publication and shall only apply in relation to a trans
shall designate the authority to be responsible for coordinating
action entered into after the measure takes effect.
the cooperation and the exchange of information with the
Commission, ESMA and the competent authorities of the
other Member States.
10. ESMA
shall
review
the
measures
referred
to
in
paragraph
1 at appropriate intervals and at least every 3 months. If the
measure is not renewed by the end of such a 3-month period it
Member States shall inform the Commission, ESMA and the
shall automatically expire. Paragraphs 2 to 9 shall apply to a
competent authorities of the other Member States of those
renewal of measures.
designations.

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EN
24.3.2012 Official
Journal
of
the
European
Union L
86/21
Article 33
2. All the information exchanged between the competent
authorities under this Regulation that concerns business or
Powers of competent authorities
operational conditions and other economic or personal affairs
1. In
order
to
fulfil
their
duties
under
this
Regulation,
the shall be considered confidential and shall be subject to the
competent authorities shall have all the supervisory and inves
requirements of professional secrecy, except where the
tigatory powers that are necessary for the exercise of their
competent authority states at the time of communication that
functions. They shall exercise their powers in any of the
such information may be disclosed or such disclosure is
following ways:
necessary for legal proceedings.
(a) directly;
Article 35
Obligation to cooperate
(b) in collaboration with other authorities;
The competent authorities shall cooperate where necessary or
expedient for the purposes of this Regulation. In particular, the
(c) by application to the competent judicial authorities.
competent authorities shall, without undue delay, supply each
other with information which is relevant for the purposes of
2. In
order
to
fulfil
their
duties
under
this
Regulation,
the carrying out their duties under this Regulation.
competent authorities shall, in accordance with national law,
have the power:
Article 36
(a) to gain access to any document in any form and to receive
Cooperation with ESMA
or take a copy thereof;
The competent authorities shall cooperate with ESMA for the
purposes of this Regulation in accordance with Regulation (EU)
(b) to require information from any natural or legal person and
No 1095/2010.
if necessary to summon and question a natural or legal
person with a view to obtaining information;
The competent authorities shall provide, without delay, ESMA
with all the information necessary to carry out its duties in
(c) to carry out on-site inspections with or without prior
accordance with Regulation (EU) No 1095/2010.
announcement;
Article 37
(d) to require existing telephone and existing data traffic
records;
Cooperation in case of request for on-site inspections or
investigations
(e) to require the cessation of any practice that is contrary to
1. The
competent
authority
of
one
Member
State
may
the provisions in this Regulation;
request assistance from the competent authority of another
Member State with regard to on-site inspections or investi
(f) to require the freezing and/or the sequestration of assets.
gations.
3. The
competent
authorities
shall,
without
prejudice
to The requesting competent authority shall inform ESMA of any
points (a) and (b) of paragraph 2, have the power in individual
request referred to in the first subparagraph. In case of an
cases to require a natural or legal person entering into a credit
investigation or an inspection with cross-border effects, ESMA
default swap transaction to provide:
may and if requested shall coordinate the investigation or
inspection.
(a) an explanation about the purpose of the transaction and
whether it is for the purposes of hedging against a risk or
2. Where a competent authority receives a request from a
otherwise; and
competent authority of another Member State to carry out an
on-site inspection or an investigation, it may:
(b) information verifying the underlying risk where the trans
action is for hedging purposes.
(a) carry out the on-site inspection or investigation itself;
Article 34
(b) allow the competent authority which submitted the request
to participate in an on-site inspection or investigation;
Professional secrecy
1. The
obligation
of
professional
secrecy
shall
apply
to
all (c) allow the competent authority which submitted the request
natural or legal persons who work or who have worked for the
to carry out the on-site inspection or investigation itself;
competent authority or for any authority or natural or legal
person to whom the competent authority has delegated tasks,
including auditors and experts contracted by the competent
(d) appoint auditors or experts to carry out the on-site
authority. Confidential information covered by professional
inspection or investigation;
secrecy may not be disclosed to any other natural or legal
person or authority except where such disclosure is necessary
(e) share specific tasks relating to supervisory activities with the
for legal proceedings.
other competent authorities.

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L 86/22
EN
Official Journal of the European Union
24.3.2012
3. ESMA
may
request
the
competent
authorities
to
carry
out
Personal data referred to in the first paragraph shall be retained
specific investigatory tasks and on-site inspections where
for a maximum period of 5 years.
information is reasonably required by ESMA to enable it to
exercise a power expressly conferred on it by this Regulation.
Article 40
Article 38
Disclosure of information to third countries
Cooperation with third countries
A competent authority may transfer to a supervisory authority
of a third country data and the analysis of data where the
1. The
competent
authorities
shall,
where
possible,
conclude conditions laid down in Article 25 or 26 of Directive
cooperation arrangements with supervisory authorities of third
95/46/EC are fulfilled but such transfer shall be made only
countries concerning the exchange of information with super
on a case-by-case basis. The competent authority shall be
visory authorities of third countries, the enforcement of
satisfied that the transfer is necessary for the purposes of this
obligations arising under this Regulation in third countries
Regulation. Any such transfer shall be made under agreement
and the taking of similar measures in third countries by their
that the third country shall not transfer the data to the super
supervisory authorities to complement measures taken under
visory authority of another third country without the express
Chapter V. These cooperation arrangements shall ensure at
written authorisation of the competent authority.
least an efficient exchange of information that allows the
competent authorities to carry out their duties under this Regu
lation.
A competent authority shall disclose information which is
confidential pursuant to Article 34 and which is received
from a competent authority of another Member State to a
A competent authority shall inform ESMA and the competent
supervisory authority of a third country only where the
authorities of the other Member States where it proposes to
competent authority has obtained the express agreement of
enter into such an arrangement.
the competent authority which transmitted the information
and, where applicable, the information is disclosed solely for
the purposes for which that competent authority gave its
2. The
cooperation
arrangement
shall
contain
provisions
on agreement.
the exchange of data and information necessary for the relevant
competent authority to comply with the obligation set out in
Article 16(2).
Article 41
Penalties
3. ESMA
shall
coordinate
the
development
of
cooperation Member States shall establish rules on penalties and adminis
arrangements between the competent authorities and the
trative measures, applicable to infringements of this Regulation
relevant supervisory authorities of third countries. For that
and shall take all measures necessary to ensure that they are
purpose, ESMA shall prepare a template document for
implemented. Those penalties and administrative measures shall
cooperation arrangements that may be used by the competent
be effective, proportionate and dissuasive.
authorities.
ESMA shall also coordinate the exchange between the
In accordance with Regulation (EU) No 1095/2010, ESMA may
competent authorities of information obtained from supervisory
adopt guidelines to ensure a consistent approach is taken
authorities of third countries that may be relevant to the taking
concerning the penalties and administrative measures to be
of measures under Chapter V.
established by Members States.
4. The competent authorities shall conclude cooperation
Member States shall notify the Commission and ESMA of the
arrangements on the exchange of information with the super
provisions referred to in the first and second subparagraphs by
visory authorities of third countries only where the information
1 July 2012 and shall notify them without delay of any
disclosed is subject to guarantees of professional secrecy which
subsequent amendment affecting those provisions.
are at least equivalent to those set out in Article 34. Such
exchange of information shall be intended for the performance
of the tasks of those competent authorities.
ESMA shall publish on its website and update regularly a list of
existing penalties and administrative measures applicable in each
Member State.
Article 39
Transfer and retention of personal data
Member States shall provide ESMA annually with aggregate
With regard to transfer of personal data between Member States
information regarding the penalties and administrative
or between Member States and a third country, Member States
measures imposed. If a competent authority discloses to the
shall apply Directive 95/46/EC. With regard to transfer of
public the fact that a penalty or an administrative measure
personal data by ESMA to Member States or to a third
has been imposed, it shall, contemporaneously, notify ESMA
country, ESMA shall comply with Regulation (EC) No 45/2001.
thereof.

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EN
24.3.2012 Official
Journal
of
the
European
Union L
86/23
CHAPTER VII
CHAPTER VIII
DELEGATED ACTS
IMPLEMENTING ACTS
Article 42
Article 44
Exercise of the delegation
Committee procedure
1. The
power
to
adopt
delegated
acts
is
conferred
on
the 1. The
Commission
shall
be
assisted
by
the
European
Commission subject to the conditions laid down in this Article.
Securities Committee established by Commission Decision
2001/528/EC ( 1 ). That committee shall be a committee within
the meaning of Regulation (EU) No 182/2011.
2. The power to adopt delegated acts referred to in
Article 2(2), Article 3(7), Article 4(2), Article 5(4), Article 6(4),
2. Where
reference
is
made
to
this
paragraph,
Article
5
of
Article 7(3), Article 17(2), Article 23(5) and Article 30 shall be
Regulation (EU) No 182/2011 shall apply.
conferred on the Commission for an indeterminate period of
time.
CHAPTER IX
TRANSITIONAL AND FINAL PROVISIONS
Article 45
3. The
delegation
of
power
referred
to
in
Article
2(2),
Article 3(7), Article 4(2), Article 5(4), Article 6(4), Article 7(3),
Review and report
Article 17(2), Article 23(5) and Article 30 may be revoked at
any time by the European Parliament or by the Council. A
By 30 June 2013, the Commission shall, in light of discussions
decision to revoke shall put an end to the delegation of
with the competent authorities and ESMA, report to the
power specified in that decision. The decision to revoke shall
European Parliament and the Council on:
take effect on the day following its publication in the Official
Journal of the European Union or on a later date specified therein.
It shall not affect the validity of any delegated acts already in
(a) the appropriateness of the notification and disclosure
force.
thresholds under Articles 5, 6, 7 and 8;
(b) the impact of the individual disclosure requirements under
Article 6, in particular with regard to the efficiency and
4. As
soon
as
it
adopts
a
delegated
act,
the
Commission
shall
volatility of financial markets;
notify it simultaneously to the European Parliament and to the
Council.
(c) the appropriateness of direct, centralised reporting to ESMA;
5. A
delegated
act
adopted
pursuant
to
Article
2(2),
(d) the operation of the restrictions and requirements in
Article 3(7), Article 4(2), Article 5(4), Article 6(4), Article 7(3),
Chapters II and III;
Article 17(2), Article 23(5) and Article 30 shall enter into force
only if no objection has been expressed by either the European
Parliament or the Council within a period of 3 months of
(e) the appropriateness of the restrictions on the uncovered
notification of that act to the European Parliament and the
sovereign credit default swaps and the appropriateness of
Council or if, before the expiry of that period, the European
any other restrictions or conditions on short selling or
Parliament and the Council have both informed the
credit default swaps.
Commission that they will not object. That period shall be
extended by 3 months at the initiative of the European
Parliament or of the Council.
Article 46
Transitional provision
1. Existing
measures
falling
within
the
scope
of
this
Regu
lation, in force before 15 September 2010, may remain
Article 43
applicable until 1 July 2013 provided that they are notified to
Deadline for the adoption of delegated acts
the Commission by 24 April 2012.
The Commission shall adopt the delegated acts under
Article 2(2), Article 3(7), Article 4(2), Article 5(4), Article 6(4),
2. Credit
default
swap
transactions
resulting
in
an
uncovered
Article 7(3), Article 17(2), Article 23(5) and Article 30 by
position in a sovereign credit default swap that have been
31 March 2012.
concluded before 25 March 2012 or during a suspension of
restrictions on uncovered sovereign credit default swaps in
accordance with Article 14(2) may be held until the maturity
date of the credit default swap contract.
The Commission may extend the deadline referred to in the first
paragraph by 6 months.
( 1 ) OJ L 191, 13.7.2001, p. 45.

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L 86/24
EN
Official Journal of the European Union
24.3.2012
Article 47
Staff and resources of ESMA
By 31 December 2012, ESMA shall assess its staffing and resources needs arising from the assumption of its
powers and duties under this Regulation and submit a report to the European Parliament, the Council and
the Commission.
Article 48
Entry into force
This Regulation shall enter into force on the day following its publication in the Official Journal of the
European Union.
It shall apply from 1 November 2012.
However, Article 2(2), Article 3(7), Article 4(2), Article 7(3), Article 9(5), Article 11(3) and (4), Article 12(2),
Article 13(4) and (5), Article 16(3) and (4), Article 17(2), Article 23(5), (7) and (8), and Articles 30, 42, 43
and 44 shall apply from 25 March 2012.
This Regulation shall be binding in its entirety and directly applicable in all Member States.
Done at Strasbourg, 14 March 2012.
For the European Parliament
For the Council
The President
The President
M. SCHULZ
N. WAMMEN

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