The EU Short Selling Regulation Revisited: New Evidence, Different Perspective?

Abstract:

EU Regulation 236/2012 lays down a common regulatory framework for short selling that is based on three fundamental principles: disclosure of short positions; settlement discipline; and supervisory discretion to intervene where market stability is threatened. Building on the most recent empirical and theoretical research, the article critically assesses the underlying rationales and regulatory philosophy of this novel EU short selling regime. This article concludes that the EU legislature has adopted a well-balanced, proportionate and flexible regulatory approach that addresses the risks of short selling without undermining its market efficiency benefits. In addition, the article makes specific proposals for refining and further improving the EU short selling regime that are expected to assist the relevant EU bodies in future revisions of EU Regulation 236/2012.