CONSOB COMMUNICATION no DME/12083249 of October 19, 2012

Communication regarding the application of the Regulation (EU) no. 236/2012 on short selling and certain aspects of credit deafult swaps

The Regulation EU No. 236/2012 of 14 March 2012 on short selling and certain aspects of credit default swaps ("Short Selling Regulation") shall apply from 1 November 2012.

The Regulation introduces inter alia:

a) the obligation of notification to competent authorities of individual net short positions in shares admitted to trading on a regulated market or on a multilateral trading facility of the European Union, where the position is equal to or higher than 0.2% of the issued share capital of the company concerned (article 5);

b) the obligation of disclosure of individual net short positions in shares, as defined above, to the public, where the position is equal to or higher than 0.5% of the issued share capital of the company concerned (article 6);

b) the obligation of notification to competent authorities of individual net short positions in debt issued by EU Member States and other sovereign issuers such as the European Investment Bank, where the position is equal to or above certain thresholds (article 7);

c) restrictions on uncovered short sales in the above-mentioned shares and sovereign debt and on uncovered sovereign credit default swaps (articles 12, 13 and 14);

d) exemptions from the previous obligations and restrictions for market making activities in relation to shares, sovereign debt and sovereign CDS, and for primary market operations in relation to sovereign debt and sovereign CDS (article 17), upon notification to the competent authority at least 30 days in advance: the notification shall be addressed to the competent authority of the home Member State for market makers and to the competent authority in relation to the sovereign debt concerned for primary dealers.

Concerning the exemptions under e), in order to ensure consistency of market practices and supervisory approaches across the EU, ESMA published on 17 September 2012 a consultation paper, "Exemption for market making activities and primary market operations under Regulation (EU) 236/2012 of the European Parliament and the Council on short selling and certain aspects of Credit Default Swaps", which provides further clarification about the exemptions regime, proposes requirements for market makers to use the exemptions and provides a template notification form.

At national level, article 4-ter (2) of the Legislative Decree. no.58 of 24.2.1998 (Consolidated Law on Financial Intermediation) as amended by article 24 of the Decree Law no 179 of 18 October 2012, designates Consob as the national competent authority for receiving the notifications, implementing the measures and exercising the functions and powers provided for in the Short Selling Regulation in relation to shares and financial instruments other than sovereign debt and sovereign CDS.

Paragraph 3 of the same article designates the Banca d'Italia and Consob as the competent authorities for exercising the ordinary functions and powers provided for in the Short Selling Regulation in relation to sovereign debt and sovereign CDS.

Furthermore, the same article envisages that the authorities "shall specify by means of a memorandum of understanding the procedures for the cooperation and the exchange of information relevant for exercising the above-mentioned functions, also in relation to infringements identified and measures adopted in the exercise of their respective roles as well as the modalities for receiving the notifications, with a view to minimising the burden for investors".

Against this background, for the purposes of the application of the Short Selling Regulation, it is convenient to distinguish obligations concerning shares and obligations concerning sovereign debt and sovereign CDS.

Concerning shares:

1. any natural or legal person, whose home Member State is Italy, shall notify Consob the intention to use the exemptions for market making activities;

2. any natural or legal person, regardless of where it is located, shall notify Consob significant net short positions in issuers whose shares have, as principal market, an Italian regulated market or that were admitted to trading for the first time on an Italian multilateral trading facility.

Investors shall refer to the specific Communication published by Banca d'Italia for sovereign debt and sovereign CDS.

Notifications relating to the use of the exemptions for market makers shall be sent via registered letter to Consob (Divisione Mercati, Ufficio Post-Trading). The letter shall be sent in advance by email at shortselling-service@consob.it.

Notifications shall be made in accordance with the above-mentioned ESMA consultation paper of 17 September 2012 and, upon approval of the final document, with the ESMA Guidelines, using the enclosed template notification forms.

Notifications to Consob relating to net short positions shall be made via the dedicated system made available, together with the user manual, on Consob website under the "Markets" section, "Short Selling" subsection, reachable at the following link (http://www.consob.it/mainen/markets/short_selling/index.html).

In accordance with the EU legislation, the system envisages the possibility for the net short position holder to delegate the task of filing notifications to a third party. To submit a notification it is required to register with the system in advance. During the registration phase it will be requested to submit electronically to Consob a copy of the mandate contract between the position holder and the reporting party, as well as a copy of a personal document of the contact person.

On the same section of the website, Consob will publish the net short positions which satisfy the requirements set for in the Short Selling Regulation.

Lastly, from 1 November 2012, Consob's resolutions which established the obligation of communicating net short positions on shares (Resolution No. 17862 of 10 July 2011) and the ban on naked short selling of shares (Resolution No. 17993 of 11 November 2011) will cease to have effect, as they will be replaced by the Short Selling Regulation.

THE CHAIRMAN
Giuseppe Vegas