04 July 2011

Plenary debate on short selling and CDS

MEPs clashed on 4 July 2011 over how to regulate short selling during a debate on a draft law which aims to restrict the practice. The new law would place conditions on the use of credit defaults swaps - a form of government debt insurance.

Some MEPs, including German green, Thomas Handel, argued that speculation was "a major factor" in the financial crisis, and called for the practice of naked short selling to be banned outright.

German liberal MEP, Wolf Klinz, agreed, arguing that it was "absurd" to "sell something you don't have".

But British Conservative, Syed Kamall, told MEPs that banning naked short selling could lead to "more complicated and less transparent instruments".

Mr Kamall urged MEPs "not to try to ban everything", and called for better coordination between regulators and supervisors.

The rapporteur Pascal Canfin (Greens/FR) opened the debate, which took place on 4 July 2011, and:

·         noted that the proposal for the Regulation has its origin in the Greek crisis of Spring 2010 and the way the financial markets behaved. The Commission was asked to present at European level a proposal for a legal framework for short selling and certain credit default swaps (CDS), which it did in autumn 2010.

·         stated that after some positioning by the co-legislators in spring 2011 and after the five trilogues, a number of compromise solutions could be found.

·         stressed that the Parliament would now like to move on and to conclude the negotiations with an agreement. Unfortunately, the Council would need, as very often, more time. The S&D, EPP and Green/EFA political groups in the ECON Committee therefore put their proposed changes to a vote in plenary, but the Parliament has not yet voted upon a legislative resolution. That leaves the possibility to continue the negotiations with the Council in view of a first reading agreement. The Rapporteur stressed that Parliament's approach, while ambitious, has also been reasonable.

·         asked to strengthen the role of the European Securities and Market Authority (ESMA) in order to ensure coherence in the internal market for financial services.

·         noted that the Council's position, which is to create a veto for Member States regarding the regulation of sovereign debts, is not acceptable for the Parliament.

·         spoke in favour of banning naked CDS. He stressed that this position has large support within the Parliament. It should not be possible to cover oneself against a risk by means of a CDS if one does not own the risk and is therefore not exposed to it.

Full text (as adopted in Plenary)

 

 

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