FIA EPTA response to the HMT consultation on sovereign debt and credit default swaps under the Short Selling Regulation review

7 August 2023

FIA EPTA supports the proposals set out in the Consultation. Whilst we acknowledge that the cover requirements under the Short Selling Regulation support settlement discipline in equities markets, we do not see the same need in the market for sovereign bonds and related CDS given the size and liquidity of these markets.

In respect of the proposal to retain the Emergency Intervention Powers regarding to sovereign bonds and related CDS, we reiterate that FIA EPTA members retain a strong preference for the removal of these powers as they are disruptive and yield no discernible benefit. If retained, we stress the need to exercise these powers only in extremely exceptional circumstances.

Advance warning of any intended short selling ban pursuant to the Emergency Intervention Powers should be provided to the market, along with empirical evidence establishing why the ban is required and the anticipated market impact. Comprehensive guidance regarding scope, treatment of related products and operation of the Market Maker Exemption should be provided in advance of the ban going into effect to enable firms to put in place appropriate controls in order to comply. Ideally, this guidance would stipulate that any applicable short selling ban should only extend to increases of or the creation of new net short positions.

  • EPTA
  • Market Structure