Members of the crack down on sovereign debt speculation and naked short selling

Members of the crack down on sovereign debt speculation and naked short selling by Sean Sprackling on Monday 07 Mar 2011 16: 08 GMT |  Permanent link |  Cosmos press release 07/03/11 by the Committee: economic and monetary AffairsA prohibition of certain industries in sovereign bonds and the requirement that traders offset their positions have been discovered at the end of each trading day was two important results of Monday's Economic Affairs Committee votes on a draft EU regulation on sale of cards and credit default swaps. MEPs also included a requirement that short sale transactions shall be reported less often, but beefed up rules to ensure that the penalties is dissuasive.Short sells ", was where speculators bet on a decline rather than an increase in the price of a security in order to make a profit, and credit default swaps", in essence, to insure a prime utevarodom on its debt obligations, both heavily involved in the recent EU sovereign debt crises.  This regulation, which steered through Parliament by Pascal Canfin (Greens/EFA, FR), takes a further step towards preventing speculation and improve transparency in the financial services sector.Position that the Committee would prevent anyone from taking part in the credit default swap (CDS) transactions if they don't already own sovereign debts linked to CDs ("naked" CDs trading), or securities whose price is heavily dependent on the country, such as shares in a larger company there.  This position is, therefore, not only by banning naked CDs trade, but also by introducing a correlation which would permit investment firms to manoeuvre.A day to solve the "naked" short sellingAlthough the position which the Committee do not prohibit completely "naked" short selling, indicates a very tight deadline to convert a naked short sale for a short sale.  At the end of the day someone naked short sales are carried out must have been converted, standing position.  A seller who fails to do the transformation in time would impose fines that the amended text States, "must be high enough to ban all profit."  The position adopted in the Committee retains its tough "to locate and reserve rule", where a seller must not only identify from where it plans to borrow shares in issue, but must also have a guarantee that it will actually be able to borrow them when the time comes. Position by the Committee puts additional requirements on investment firms, especially in exceptional circumstances.  It also allows national regulatory authorities to require lenders to notify them in exceptional situations. In an emergency situation, the national authorities also provide more information within 24 hours to the European Securities and markets authority (ESMA), when requested.On the other hand, the position which the Committee only requires investment firms to report on their short sales transactions at the end of the trading day, rather than to report any short sale event, proposed by the Commission. Investors would also need to provide the distribution agreement would require less information than the original Commission proposal.Members who primarily works with the management of the regulation by Parliament will now sit down with the Member States to Thrash out a component which can then be presented to the House to vote in the coming months.  The regulation is expected to be in force until 2012.

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