ESMA · ESMA_QA_1954 Answer Published

Uncovered Credit Default Swap - Static hedging through the holding of a sovereign bond

Regulation
Short Selling Regulation (SSR) Regulation (EU) No 236/2012
Topic
Other SSR-related topics
Submitted
2013-01-29
Answered
2013-01-29
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Question

Should the holding of a sovereign bond be treated as a static or dynamic hedge for the purposes of Articles 19 and 20 of the DR?

Answer

[ESMA70-145-408 SSR Q&A, Q&A 11.4] Article 20(2) of the DR specifies that direct exposures to sovereign or public sector bodies in the sovereign are examples of static hedging. The holding of a sovereign bond should therefore be treated as a static hedge.
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This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.

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