Draft Short Selling (Amendment) (EU Exit) Regulations 2018

Jonathan Reynolds Excerpts

Wednesday 21st November 2018 General Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is indeed a pleasure to serve under your chairmanship, Mr Robertson. As the Minister said, this is one of a large number of SIs relating to preparations for a potential no-deal Brexit. We are enjoying doing about 70 between now and February. I think that I speak for everyone this morning when I say what a pleasure it is to have one of them immediately after two days on the Finance (No. 3) Bill. Our enthusiasm for being able to have a session this morning is evident.

As the Minister knows, the Opposition have voiced concerns about the adequacy of this process, but I will state them again for the record. The record number of Treasury statutory instruments, and the speed at which they are set to unfold, is deeply concerning when it comes to ensuring the Government are held fully accountable. As the Opposition, we commit to make every effort to do so, but this is a constitutionally unprecedented and enormously resource-intensive task that leaves room for error.

Today’s legislation deals with the issue of short selling. As the Minister said, regulation of short selling is something that EU member states have worked collectively to achieve following the financial crisis, in line with global efforts to ensure that shorting does not exacerbate worsening market conditions for particular securities in times of volatility. The 10-year anniversary of the collapse of Lehman Brothers and the darkest moments of the financial crisis are a stark reminder that we cannot afford to be complacent on that front. It therefore makes sense that those regulations should be thoroughly enshrined in UK law, and protected in the event that we crash out without a deal.

However, I have some further questions to ask the Minister. First, which stakeholders, if any, were consulted regarding the instrument? Was there any dialogue with trading venues about implementation of these regulations from a solely UK perspective and, if so, how was their feedback taken into account? In addition, the explanatory memorandum says that

“the power to set notification thresholds for short selling positions”

will be transferred

“from the EU Commission to the Treasury.”

The Minister made that point explicitly, so can he elaborate on the process for setting those thresholds in future? Will they continue to be fixed at the levels used by the EU Commission, or will the FCA or the Treasury have the power to adapt them in future? That seems to be the most substantive issue before us, and I would be grateful if the Minister provided some clarity on those points.