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Trading in financial products – new rules for safer markets - 16/09/2010

The EU’s reforms are a response to the global financial crisis © AP

Proposed changes to EU rules would make short-selling and trading in over-the-counter derivatives safer and more transparent.

The reforms are part of a series of steps being taken by the Commission to create a more harmonised and sounder financial system for the EU in the wake of the global economic crisis.

The proposals, announced yesterday, would reduce risk and help coordinate preventative action among EU countries, says internal market commissioner Michel Barnier.

One of the draft regulations would require investors to clear trades in over-the-counter derivatives through central counterparties. The trades would have to be reported to registered central repositories under the regulation of the new European Securities Market Authority.

The second regulation would require all short sales of securities to be flagged as such on trading exchanges. Investors holding specified thresholds of a shorted security would have to disclose their positions to regulators and to the market. The proposal also regulates short positions on sovereign debt obtained through credit default swaps.

The proposals now pass to the European Parliament and the Economic and Financial Affairs Council for consideration.

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