Answer to Written Question: Gamestop short selling
(Source: European Parliament)
Answer given by Ms McGuinness
on behalf of the European Commission
The European legislative framework ensures that markets are resilient. The Markets in Financial Instruments Directive (MiFID II) requires trading venues to put in place trading halts when a significant movement in a financial instrument on their platform breaches a certain threshold. This ensures that trading systems are resilient, have sufficient capacity to deal with peak order volumes, and are able to maintain orderly trading under severe market stress.
Another safeguard is the regime where central counterparties (CCPs) interpose themselves between counterparties and require a margin from them. A margin is necessary to cover the risk that either the buyer or the seller is unable to pay when the instrument is delivered. The Commission will continue to monitor whether volatility in a share could generate a feedback loop whereby margin calls on retail brokers are decisive in imposing “trading stops” on their online clients.
On the protection of market integrity, the Market Abuse Regulation prohibits persons acting in collaboration from committing market abuse, for example brokers who devise and recommend a trading strategy designed to result in market abuse. A review of Regulation in 2022 will assess whether the framework could be further improved and reinforced.
The Short Selling Regulation prohibits naked short selling and mandates the reporting and disclosure of significant net short positions in shares. The Commission continues to assess whether any changes in the regulatory regime are necessary, such as adjustments to the reporting and disclosure rules on short selling or aggregated net short positions