The European Parliament adopted the new rules on sovereign debt speculation and short selling limitations. According to MEPs, the rules will impose much more transparency and virtually ban certain CDS trades, thereby making speculation on a country's default more difficult. Both law intends have been pushed by the Commission to tackle the financial crisis.

MEPs adopted new rules to curb short selling and trading in credit default swaps (CDS), a financial product for insuring against default. The measure is taken to tackle the crisis because short selling and CDS trading are accused of having fuelled market volatility, with CDS trades moreover having been widely blamed for potentially aggravating Greece's troubles.

During negotiations with Member States, Parliament obtained a ban on naked CDS trading (purchasing default insurance contracts without owning the related bonds). Member States reached an agreement in October 2011. The sole exception is an option for a national authority to lift the ban for a maximum of 12 months in cases where its sovereign debt market is no longer functioning properly, and then possibly renew it for a further 6 months. Even this possibility would be closely circumscribed, because the text specifies a limited number of indicators which could justify the regulator's action. Moreover, within 24 hours, the European Securities and Markets Authority (ESMA) would publish an opinion on its web site as to the utility of suspending the ban. A negative opinion from ESMA would have political weight.

Additionally, the majority of MEPs originally advocated introducing a requirement to convert a naked short sale, the riskiest sort of short selling, to a normal short sale within a single trading day. This so-called hard "locate and reserve rule", whereby a trader must not only notify from where it plans to borrow the shares in question but must also have a guarantee that it will indeed be able to borrow them, was finally diluted. The regulation now requires the trader to locate and have a "reasonable expectation" of being able to borrow the shares from the located party. ESMA however will determine measures for judging what may be deemed a “reasonable expectation”.