Member Article

ESMA DECISION

The European Securities and Markets Authority („ESMA“) announced today the decision to lower the initial reporting threshold for net short positions under the EU Short Selling Regulation to 0.1 percent (the „ESMA Decision“). The ESMA Decision has entered into force immediately after its publication on ESMA’s website.

INITIAL REPORTING THRESHOLD NOW 0.1 PERCENT (PRIOR: 0.2 PERCENT)

The ESMA Decision requires natural or legal persons who have net short positions in relation to shares admitted to trading on a regulated market in the European Union to notify the competent national authority under Regulation (EU) No 236/2012 (“EU Short Selling Regulation”) details of any such position if the position reaches or exceeds 0.1 percent of the issued share capital of the issuer.

INCREASE TRANSPARENCY TO MONITOR POTENTIAL THREATS TO THE ORDERLY FUNCTIONING AND INTEGRITY OF THE FINANCIAL MARKETS DUE TO THE OUTBREAK OF THE COVID-19 PANDEMIC

The intention of this measure is to enhance the transparency for ESMA and the EU national competent authorities on short selling to enable a monitoring of any potential threats to the orderly functioning and integrity of the financial markets due to the outbreak of the COVID-19 pandemic and the recent losses on the financial markets.

ONLY SHARES ADMITTED TO TRADING ON A REGULATED MARKET IN THE EU ARE SUBJECT TO LOWER REPORTING THRESHOLD

Contrary to the EU Short Selling Regulation, which applies to shares admitted to trading on trading venues in the European Union, the ESMA Decision applies only to shares admitted to trading on a regulated market in the European Union. This means that shares admitted to the German open market (Freiverkehr) are excluded from the lower reporting threshold. Furthermore, the ESMA Decision does not apply to shares admitted to trading on a regulated market in the European Union where the principal venue for trading of the shares is located outside of the European Union. Please note that pursuant to the ESMA administrative practice this requires that the relevant shares are included in the ESMA list of exempted shares under the EU Short Selling Regulation. The list can be found here.

ESMA DECISION APPLIES WITH IMMEDIATE EFFECT FOR A PERIOD OF THREE MONTHS

The ESMA Decision comes into force with immediate effect and shall apply for a period of three months. No changes are made to the method of reporting to the national competent authority (in case of Germany: the German Federal Financial Supervisory Authority – Bundesanstalt für Finanzdienstleistungsaufsicht). The threshold for public disclosure of net-short positions (currently at 0.5 percent) and the incremental threshold of 0.1 percent for net-short positions above the initial reporting threshold remains the same.

The ESMA Decision can be found here.