German regulator bans short selling on Wirecard
18 February 2019 Munich
Image: Shutterstock
The German financial regulator, The Federal Financial Supervisory Authority (BaFin), has stopped short selling on Wirecard as its falling share price has caused uncertainty in the market.
BaFin indicated a decrease in the Wirecard share price occurred between 30 January and 15 February 2019.
BaFin notified European Securities and Markets Authority (ESMA) on 17 February 2019 of its intention to make use of its powers of intervention, introducing an emergency measure, which bans opening or increasing net short positions on shares issued by Wirecard—either directly or through related instruments, for a duration of two months.
BaFin justified the proposed measure by the “existence of specific adverse situations or circumstances that constitute a serious threat to market confidence in appropriate price determination in Germany”.
ESMA agreed that the price drop, the sharp increase in the net short positions and the high volatility observed in the prices of Wirecard shares constituted a threat to the orderly markets and to market confidence.
An additional problem identified by BaFin is the potential contagion risk, with the lack of confidence regarding an appropriate price determination extending to other issuers.
In an open opinion release, ESMA said: “The possibility that the large short positions and the severe declines in price observed over the last weeks might correspond to manipulative practices constitutes in ESMA’s view a clearly adverse scenario for market confidence, as it risks undermining investors’ trust in the price formation mechanism.”
It added: “ESMA also notes that the coincidence in time of the building up of significant net short positions, the publication of the news reports and the abrupt price declines described by BaFin deserve further investigations, in particular since similar situations took place in 2008 and 2016, that were subject to scrutiny by BaFin and German public prosecutors.”
ESMA also considered the two months duration of the measure, instead of the maximum period of three months allowed by the relevant regulation (No 1095/2010), is adequate, considering that BaFin may lift the measure ahead of its expiry, taking into account market conditions.
ESMA recommended BaFin to closely monitor the market conditions and to consider lifting the measure before the initial deadline if the situation so permits, to ensure that the restrictions remain in place for the shortest possible time.
Wirecard is a payment service provider headquartered near Munich. It is admitted to trading on the Frankfurt Stock Exchange.
Wirecard offers its customers electronic payment transaction and risk management solutions, as well as the issuing and processing of physical and virtual cards.
BaFin indicated a decrease in the Wirecard share price occurred between 30 January and 15 February 2019.
BaFin notified European Securities and Markets Authority (ESMA) on 17 February 2019 of its intention to make use of its powers of intervention, introducing an emergency measure, which bans opening or increasing net short positions on shares issued by Wirecard—either directly or through related instruments, for a duration of two months.
BaFin justified the proposed measure by the “existence of specific adverse situations or circumstances that constitute a serious threat to market confidence in appropriate price determination in Germany”.
ESMA agreed that the price drop, the sharp increase in the net short positions and the high volatility observed in the prices of Wirecard shares constituted a threat to the orderly markets and to market confidence.
An additional problem identified by BaFin is the potential contagion risk, with the lack of confidence regarding an appropriate price determination extending to other issuers.
In an open opinion release, ESMA said: “The possibility that the large short positions and the severe declines in price observed over the last weeks might correspond to manipulative practices constitutes in ESMA’s view a clearly adverse scenario for market confidence, as it risks undermining investors’ trust in the price formation mechanism.”
It added: “ESMA also notes that the coincidence in time of the building up of significant net short positions, the publication of the news reports and the abrupt price declines described by BaFin deserve further investigations, in particular since similar situations took place in 2008 and 2016, that were subject to scrutiny by BaFin and German public prosecutors.”
ESMA also considered the two months duration of the measure, instead of the maximum period of three months allowed by the relevant regulation (No 1095/2010), is adequate, considering that BaFin may lift the measure ahead of its expiry, taking into account market conditions.
ESMA recommended BaFin to closely monitor the market conditions and to consider lifting the measure before the initial deadline if the situation so permits, to ensure that the restrictions remain in place for the shortest possible time.
Wirecard is a payment service provider headquartered near Munich. It is admitted to trading on the Frankfurt Stock Exchange.
Wirecard offers its customers electronic payment transaction and risk management solutions, as well as the issuing and processing of physical and virtual cards.
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