Comments by NYSE Euronext on CESR’s proposal for a Pan-European Short Selling Disclosure Regime
· NYSE Euronext believes that it is crucial to ensure that short selling per se is not seen as constituting an abuse and that, on the contrary, it is recognized that in the normal course of events short selling is a key component of an efficient price discovery process. Having said that, NYSE Euronext appreciates that in extreme market conditions, the level of short selling may prompt Government intervention in the interests of broader economic objectives, such as the financial stability of a particular institution or sector.
· NYSE Euronext remains unconvinced about the rationale for operating a short selling disclosure regime on a continual basis – as opposed to agreeing it in advance, but only using it as part of a package of emergency measures, when justified by extreme market conditions.
· NYSE Euronext agrees with CESR that the current approach to the disclosure of short positions - whereby CESR members have implemented similar but different regimes - is unsatisfactory and that, if short selling disclosure is to continue to be required by CESR members, a more coherent approach is necessary. NYSE Euronext agrees that, in order to be meaningful, any such regime would need to apply to transactions regardless of trading venue (i.e. Regulated Market, MTF, Internalisation, crossing networks, OTC). Moreover, individual CESR members should refrain from imposing additional measures at national level.
· In relation to the treatment of derivatives within any Pan-European disclosure regime, they should be accounted for on a delta adjusted basis. Moreover, as a practical matter NYSE Euronext does not believe it would be sensible to regard a short position in a broad based equity index derivative or an Exchange Traded Fund (“ETF”) as constituting short selling in relation to each component stock within the index or fund. As such, NYSE Euronext believes that broad based index derivatives and ETFs should be exempt from the disclosure regime.
· Finally, NYSE Euronext believes that any disclosure regime should be based upon short position reporting. NYSE Euronext considers that the alternative approach of flagging orders pre-execution would be costly, difficult to implement, and less effective in terms of identifying the level of short sales.
© NYSE Euronext
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