1. A natural or legal person may enter into sovereign credit default swap transactions only where that transaction does not lead to an uncovered position in a sovereign credit default swap as referred to in Article 4.
2. A competent authority may temporarily suspend restrictions referred to in paragraph 1, where it has objective grounds for believing that its sovereign debt market is not functioning properly and that such restrictions might have a negative impact on the sovereign credit default swap market, especially by increasing the cost of borrowing for sovereign issuers or affecting the sovereign issuers’ ability to issue new debt. Those grounds shall be based on the following indicators:
(a) a high or rising interest rate on the sovereign debt;
(b) a widening of interest rate spreads on the sovereign debt compared to the sovereign debt of other sovereign issuers;
(c) a widening of the sovereign credit default swap spreads compared to the own curve and compared to other sovereig
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