Reed Smith Client Alerts

The COVID-19 pandemic crisis has led regulators globally to use their powers to provide stability to financial markets and their participants. This alert focuses on short selling bans within the EU and regulatory initiatives that provide capital and liquidity relief to those firms required to hold regulatory capital.

作者: David Calligan Tim Dolan Claude Brown Brett Hillis Chris Borg Bhav Panchal

Exterior of a courthouse

Short selling bans

Under the Short Selling Regulation (SSR),1 EU national regulators can ban the short selling of shares where adverse events or developments constitute a serious threat to financial stability.

As a result of the volatility caused by the pandemic, several EU regulators have banned short selling in some or all shares admitted to trading on venues within their jurisdictions. The relevant EU national regulators imposing a ban are those in Austria, Belgium, France, Greece, Italy and Spain. The bans are currently effective and will last for between one and three months.

Further details on the application, exemptions and timeframes for those regulators’ bans can be found on the FCA’s website.

In March, the FCA released a statement noting that it will also ban short selling in the shares identified by the relevant EU regulators in order to support those EU regulators. The FCA will continue to follow this policy unless the FCA considers that its assistance to those EU regulators is not necessary. Notably, the FCA sets a high bar on imposing any bans on the short selling of UK shares, but cannot rule out imposing such a ban.

Short selling position reporting threshold amendment

The SSR2 requires holders of net short positions in shares traded on an EU regulated market to notify the relevant EU national regulator in the event that the holder’s net short position exceeds 0.2 per cent of the issuer’s share capital, and for every 0.1 per cent increase above that threshold.

In March, ESMA issued a decision temporarily lowering the 0.2 per cent threshold to 0.1 per cent until 16 June 2020.

The Decision applied immediately to any person, irrespective of their country of residence. The Decision does not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is in a third country; neither does it apply to market making or stabilisation activities.

The FCA issued a statement providing that its systems will be able to accept notifications at the lower threshold from Monday 6 April 2020. However, firms will not be required to amend and resubmit notifications submitted to the FCA between 16 March and 3 April 2020.

The Decision does not affect the public disclosure requirements of the SSR.