The Argentine Securities and Exchange Commission, (“CNV”), has issued Regulation No 712-E/2017, calling the public for comments on a proposed regulation on securities lending and short selling. The lending and short selling transactions being regulated are those carried out in securities markets.
1. Short Selling
The proposed regulation defines short selling as those transactions in which a party sells securities obtained under a securities loan entered into in the same negotiation day and with the same settlement term.
The short selling transactions must be carried out through the negotiating system authorized by the CNV, guaranteeing the priority price/time and by crossing of offers. Short selling transactions have to be guaranteed by the market or the clearing house.
The price in the short sale has to be equal or higher than the price of the last transaction executed in the market, but the markets can establish exceptions to this rule.
Each market has to regulate short selling transactions establishing the eligible assets and for each security, and the limits per security per client and per broker. The short selling regulations established by the markets have to be approved by the CNV.
Short selling offers would have to be identified in the market.
2. Securities Lending
The securities lending transaction would be allowed for the following purposes:
- to cover a transitory shortfall of securities to be delivered by the client on the settlement day of an executed transaction, provided that the borrowing client has the security but does not, circumstantially, have it available on the settlement date; or
- to enter into a short selling transaction
The debt or equity securities used in this transaction can be securities in the proprietary portfolio of the agent or in its client’s portfolio. In case the securities are owned by the client, the agent will request a specific written conformity from the lending client for the operation. The borrowing client must also issue an authorization in favor of its agent.
The registration of the transaction must include the value in cash of the security and the annual interest rate applicable to the loan.
The securities lending transaction can be canceled before its maturity date.
The securities lending transaction would have to be guaranteed by the market or the clearing house.
Comments can be made within 15 business days of the publication of Regulation 712-E/2017. The deadline is December 13, 2017.
This insight is a brief comment on legal news in Argentina; it does not purport to be an exhaustive analysis or to provide legal advice.