ESMA halves threshold for short position disclosures
18 March 2020 Paris
Image: Shutterstock
Traders taking a short position in shares traded within the EU must now disclose their position to the relevant national competent authority if it reaches or exceeds 0.1 percent of the issued share capital.
The European Securities and Markets Authority (ESMA) has this week amended the EU's Short Selling Regulation to reflect the need for greater oversight of the its markets.
The threshold has been temporarily lowered from 0.2 percent of the issued share capital amid a significant spike in shorting activity driven by the COVID-19 pandemic currently raging throughout Europe.
Traders will have to continue disclosing their position for each 0.1 percent above the new threshold.
ESMA says it is enforcing this precaution under the exceptional circumstances that is making it essential for authorities to monitor the markets, and ensuring financial stability and investor protection.
The measure takes immediate effect (as of 17 March), requiring net short position holders to notify NCA’s of their relevant positions at the close of the trading session on Monday.
The temporary transparency obligations apply to any natural or legal person, irrespective of their country of residence.
But, they do not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country, market making or stabilisation activities.
ESMA has not ruled out using further powers to steady markets during this period of upheaval.
The amendment comes alongside the EU markets watchdog’s approval of length short selling bans in Italy, Spain and France.
All three countries have seen significant pressure on the value of their main indexes and have shut down traders’ ability to create further short positions to save their local equity markets from further punishment.
The European Securities and Markets Authority (ESMA) has this week amended the EU's Short Selling Regulation to reflect the need for greater oversight of the its markets.
The threshold has been temporarily lowered from 0.2 percent of the issued share capital amid a significant spike in shorting activity driven by the COVID-19 pandemic currently raging throughout Europe.
Traders will have to continue disclosing their position for each 0.1 percent above the new threshold.
ESMA says it is enforcing this precaution under the exceptional circumstances that is making it essential for authorities to monitor the markets, and ensuring financial stability and investor protection.
The measure takes immediate effect (as of 17 March), requiring net short position holders to notify NCA’s of their relevant positions at the close of the trading session on Monday.
The temporary transparency obligations apply to any natural or legal person, irrespective of their country of residence.
But, they do not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country, market making or stabilisation activities.
ESMA has not ruled out using further powers to steady markets during this period of upheaval.
The amendment comes alongside the EU markets watchdog’s approval of length short selling bans in Italy, Spain and France.
All three countries have seen significant pressure on the value of their main indexes and have shut down traders’ ability to create further short positions to save their local equity markets from further punishment.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
