A senior adviser to the European Court of Justice has indicated that the European Securities and Markets Authority (ESMA) will be stripped of its power to ban short selling of financial instruments in emergencies.
The emergency powers granted by that article to the ESMA to intervene in the financial markets of Member States so as to regulate or prohibit short selling go beyond what could be legitimately adopted as a harmonising measure necessary for the establishment or functioning of the internal market.
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European Court of Justice Advocate General Niilo Jaaskinen said the article in the EU’s short-selling law granting ESMA such power should be annulled.
Jaaskinen added the power should have been based on a different part of the EU treaty which requires decisions to be taken on the basis of unanimity among member states.
Jaaskinen has rejected the emergency powers for the ESMA because the measure did not contribute to market harmonisation but led to replacement of national decision-making with EU level decision-making.
The legal opinion is non-binding but the ECJ normally agrees with the advocate general. The view could strike a blow for centralisation of power in the EU and harmonisation of markets, traditionally seen as the aim of the body.
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By GlobalDataThe law gives ESMA the power to force member states to introduce a ban if there is a threat to the orderly functioning of markets and financial stability.
