EU short selling disclosure threshold to reset
15 March 2021 France
Image: jorgenmac100/adobe.stock.com
The lowered threshold for reporting net short selling positions in the EU — brought in to enhance transparency during the COVID-19 market disruption — is set to finally expire this week, following two extensions.
The European Securities and Markets Authority (ESMA) has confirmed the reporting threshold of 0.1 per cent and above of net short positions will expire on 19 March, almost exactly a year after it was imposed.
The usual threshold of 0.2 per cent dictated by the Short Selling Regulation was lowered on 16 March 2020 in response to turmoil in European equity markets wrought by the first emergence of COVID-19.
The lower threshold was then renewed in June, September, and December 2020, as the pandemic continued to rage across the continent, even though equity markets regained much of their initial losses by Q3 and ended the year in a strong position.
Commenting on the decision, ESMA says its view is that with GDP forecasts showing moderate optimism for recovery, volatility decreasing and the main EU stock indices close to pre-pandemic levels, the current situation in financial markets no longer resembles the emergency situation that required the Short Selling Regulation to maintain the measure.
“The overall level of net short positions is decreasing across the EU, reducing the risk that selling pressures could initiate or exacerbate potential negative developments connected with the evolution of the pandemic,” the authority explains.
ESMA’s enhanced reporting rules were accompanied by short selling bans of varying lengths and scopes imposed by national regulators in several major EU markets including France, Greece, Spain, Austria and Belgium, but notably not Germany or the UK.
The UK scrapped the lower threshold as part of its onshoring of the Short Selling Regulation during the Brexit transition period, meaning it reverted to the 0.2 per cent level as of 1 January.
The European Securities and Markets Authority (ESMA) has confirmed the reporting threshold of 0.1 per cent and above of net short positions will expire on 19 March, almost exactly a year after it was imposed.
The usual threshold of 0.2 per cent dictated by the Short Selling Regulation was lowered on 16 March 2020 in response to turmoil in European equity markets wrought by the first emergence of COVID-19.
The lower threshold was then renewed in June, September, and December 2020, as the pandemic continued to rage across the continent, even though equity markets regained much of their initial losses by Q3 and ended the year in a strong position.
Commenting on the decision, ESMA says its view is that with GDP forecasts showing moderate optimism for recovery, volatility decreasing and the main EU stock indices close to pre-pandemic levels, the current situation in financial markets no longer resembles the emergency situation that required the Short Selling Regulation to maintain the measure.
“The overall level of net short positions is decreasing across the EU, reducing the risk that selling pressures could initiate or exacerbate potential negative developments connected with the evolution of the pandemic,” the authority explains.
ESMA’s enhanced reporting rules were accompanied by short selling bans of varying lengths and scopes imposed by national regulators in several major EU markets including France, Greece, Spain, Austria and Belgium, but notably not Germany or the UK.
The UK scrapped the lower threshold as part of its onshoring of the Short Selling Regulation during the Brexit transition period, meaning it reverted to the 0.2 per cent level as of 1 January.
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