EU Short Selling Restrictions: A Further Update

The Belgian, French, Italian and Spanish regulators have issued further announcements on short selling restrictions. Please refer to the links for details of the restrictions in each jurisdiction (the majority of which apply to trading on 17 March 2020 only).

These announcements follow closely on the heels of similar restrictions announced on 13 March and the announcement by ESMA of the lowering of the net short position reporting threshold to 0.1% on 16 March (please refer to the links for our summaries of these measures).

In addition to the announcements themselves, we would draw your attention to the following points that may be helpful in the next few weeks:

1. Whereas most restrictions to date (during the current crisis) have been for a single trading day, the Spanish regulator announced that the prohibition is extended for a whole month, until 17 April 2020. This can be extended for up to a further 3 months or indeed be curtailed early if necessary. We believe the Italian regulator is also considering a ban over a more extended period.
    
2. The Spanish ban covers any transaction on shares or indexes, including cash transactions, derivatives traded on trading venues or OTC derivatives which create or increase a net short position, even intra-day. A net short position for these purposes is defined in Article 3.1 of the Short Selling Regulation (i.e. the net short position including all derivatives). This is a change from the earlier ban which applied only to cash transactions, and we believe this approach (which is more logical) may be extended to other jurisdictions in due course.
    
3. The FCA announced today that it is unable to implement immediately the change in the reporting threshold for net short positions, announced yesterday by ESMA, from 0.2% to 0.1%, due to required systems changes. Therefore, firms making notifications to the FCA (for shares whose principal trading venue is located in the UK) should continue to report initially only at the 0.2% level, not 0.1% as proposed by ESMA, until the FCA advises otherwise.

We expect firms will continue to monitor for further announcements on the short selling front in the next few days. Whilst we do not propose to provide clients with updates on every individual addition to the prohibitions, we will continue to alert you to any significant changes to the EU short selling regime itself.

For More Information

To discuss anything covered in this alert, contact Ruth Avenell, Martin Lovick, or your usual ACA consultant. 

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