ESMA Guidelines and Recommendations

ESMA advises the commission on specific elements of the short-selling regulation

ESMA Guidelines and Recommendations

Date: 02 January 2018

On 21 December 2017, the European Securities and Markets Authority (ESMA) issued its Technical Advice to the European Commission (EC) on how to improve the Short-Selling Regulation (SSR). 


In line with the mandate received, ESMA proposes a number of concrete amendments on controversial areas of the SSR to improve its relevance, effectiveness, coherence, and efficiency.


ESMA’s Technical Advice includes proposals around the three main elements of the mandate:

  1. Exemption for market making activities;
    • ESMA proposes including the different types of on-venue market making activities described in MiFID II in the definition of ‘market-making activities’;
    • ESMA considers that market makers should be members or participants of only one of the trading venues where their market-making activity takes place, not of all of them;
    • ESMA proposes not requiring any membership requirement for OTC market-making activity;
    • ESMA suggests introducing reporting obligations for market makers.
  1. Short-term bans on short-selling;
    • ESMA recommends that only the competent authority of the most relevant market should have the capacity to adopt a short-term ban applicable across Europe;
    • ESMA proposes transforming the current bans on short selling into a ban on entering into or increasing net short positions.
  1. Transparency of net short positions;
    • ESMA suggests practical improvements of the current regime including building a centralised notification and publication system across Europe;
    • ESMA supports requiring the LEI for the identification of certain position holders.
The SSR lays down a common regulatory framework with regard to the requirements and powers relating to short selling and credit default swaps (CDS) and ensures greater coordination and consistency between Member States. The SSR aims to enhance transparency, reduce certain risks associated with short selling and uncovered CDS, and ensure a common regulatory approach across Member States.