The ICMA European Repo Council (ERC) has expressed concern over proposed new short selling rules for the European Union, Fundamentals reports. The council has urged the European Parliament to impose the buy-in or penalty at the settlement venues, or else trading will get distorted. As per the Article 13, the buy-in or penalty should be imposed at the trading venue level.

The Article 13 will require trading venues to buy-in securities in the event of a failed trade, while as per ERC Chairman, Godfried Vidts, the move will create an assumption that the venues will be able to access the full range of securities, while in actual fact they only act to match buyers and sellers. ERC also raised concerns about Article 13 requiring the trading venue to pay cash compensation to the buyer based on the value of the securities to be delivered, plus extra compensation for any losses on the behalf of the buyer.

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