The European Regulation on short-selling (Regulation (EU) No. 236/2012 of the European Parliament and of the Council), which introduces notification requirements with regard to net short positions above a certain threshold and some restrictions on short sales of sovereign debt instruments and purchases of sovereign credit default swaps, has been in force since 1 November 2012.

For sovereign debt and and sovereign credit default swaps, Regulation No. 236/2012:

  • introduces the obligation to notify the competent authorities of significant individual net short positions in sovereign debt (Article 7 together with Commission Delegated Regulation (EU) No. 826/2012 of 29 June 2012 and Commission Delegated Regulation (EU) No. 918/2012 of 5 July 2012);
  • restricts uncovered short-selling   and the taking of uncovered positions in sovereign credit default swaps (Articles 13 and 14 together with Commission Implementing Regulation (EU) No. 827/2012 of 29 June 2012);
  • exempts the activities of market makers and primary dealers in government securities from the above requirements, subject to notification to the competent authorities.

Article 4-ter of the Consolidated Law on Finance (Legislative Decree 58/1998), introduced by Decree Law 179/2012, makes the Bank of Italy and Consob the competent authorities to receive notifications, implement measures and exercise the functions and ordinary powers provided for in the Regulation on short-selling. The Ministry of Economy and Finance (MEF) is the competent authority for the powers of intervention in exceptional circumstances, powers to be exercised on a proposal from the Bank of Italy after consulting Consob.

The tasks of each authority and the procedures for their cooperation for the exercise of their respective functions are established in the Memorandum of Understanding between the MEF, the Bank of Italy and Consob pursuant to Article 4-ter, paragraph 6, of the Consolidated Law on Finance, signed in April 2013 (MOU).

Under the MOU, the Bank of Italy:

  • calculates, in agreement with the MEF, the total amount of sovereign debt outstanding for the purposes of determining the initial notification threshold and the subsequent incremental levels for net short positions in Italian sovereign debt;
  • conducts analysis and monitoring of the liquidity of the Italian sovereign debt market, in order possibly to propose to the MEF the temporary suspension of the restrictions on short-selling;
  • proposes to the MEF the adoption of further restrictions on short-selling when exceptional circumstances pose a threat to financial stability or market confidence.

According to the MOU, notifications of net short positions in sovereign debt and notifications by market makers and primary dealers in government securities claiming exemption must be addressed to the Bank of Italy.

To notify net short positions in sovereign debt, operators are to follow the ad hoc notification procedures specified at the following link. On 1 February 2013 the ESMA published the final version of its Guidelines on the Exemption for Market Making Activities and Primary Market Operations under Regulation (EU) 236/2012, clarifying, among other things, the requirements in order to qualify for exemptions and the procedures for notifying exemptions. Italy has implemented the Guidelines, and on 5 June 2013 the Bank of Italy and Consob published a joint communication specifying the information to be transmitted to the authorities for their assessment of eligibility for exemption.

On 4 november 2019 Bank of Italy and Consob have published an update to the Joint Banca d'Italia/Consob Communication of 5 June 2013 regarding the application of the ESMA Guidelines on the Exemption for market making activities conducted outside a trading venue.

Community legal framework

Italian law - Secondary sources