We all know what short selling is, right? It's when you sell something you don't own. Except the practice is something rather different, involves repurchase agreements, implicit interest charges, delayed settlement dates and a lot of technicalities of market trading. The European Securities and Markets Authority has produced its final report, providing technical advice about short selling to support a new Regulation of the European Union on short selling. A Regulation, in the language of the EU, is a law binding in all member states and not subject to local interpretation.
ESMA tries to define what is and is not a short sale,
looking separately at practices in a variety of instruments: shares, sovereign debt, credit default swaps.
The concept of ownership in the Member States concerning securities is not harmonized," it said. "This issue may be considered by the Commission in its future proposal on the Securities Law Directive. This Delegated Act should not anticipate that proposal. For the meantime, it seems appropriate to define legal and beneficial ownership according to the respective civil law or securities law applicable for the relevant sale."
Source document: The ESMA final report is a 92-page pdf file.
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