--Olivia Thetgyi

The latest versions of the European Parliament’s proposed rules on naked credit default swaps and short selling either remove the topic of buy-in entirely or limit its scope, marking a complete turnaround to previous legislative reports on the issue.

The change brings a measure of relief to exchanges and interdealer brokers. The Wholesale Markets Brokers’ Association for one had argued that requiring buy-in of trading venues would be difficult because they are not position-taking entities (DW, 12/14/10). Buy-in is the process by which a third party delivers the securities to a buyer if the seller fails to do so.

In the original draft by the European Commission, trading venues or CCPs were obliged to buy-in shares or sovereign debt four to six days after a trade if the seller failed to deliver the securities. Proposed amendments by Pascal Canfin, European Parliament rapporteur on naked CDS and short selling, added firms executing orders for clients and central securities depositories to the list of parties responsible for buy-in.....


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