ESMA has issued a decision renewing the temporary requirement to temporarily lower the reporting threshold from 0.2% to 0.1% for net short position holders in shares traded on an EU regulated market e.g. Nasdaq Copenhagen. Accordingly, the temporary lowered threshold for reportings to the Danish Financial Supervisory Authority is currently applicable for an additional three months from 17 June to 17 September 2020. The decision allows for authorities to monitor developments in markets, as the COVID-19 pandemic continues to have serious adverse effects on the economy in the EU.
On 16 March 2020, the European Securities and Markets Authority (ESMA) issued a decision which temporarily lowered the reporting threshold from 0.2% to 0.1% for net short position holders in shares traded on an EU regulated market such as Nasdaq Copenhagen.
ESMA issued a decision on 10 June 2020 to renew the lowered notification threshold from 0.2% to 0.1% for net short position holders for an additional three months. The decision is available here. The decision enters into force on 17 June 2020 after expiry on 16 June of the previous decision and applies for a period of three months until 17 September 2020 to any natural or legal person, irrespective of their country of residence.
The short selling regulation (236/2012/EU) includes certain notification requirements in connection with net short positions in shares admitted to trading on an EU regulated market, e.g. Nasdaq Copenhagen.
When a natural or legal person has a net short position in relation to the issued share capital of a company with shares admitted to trading on an EU regulated market, such person is required to notify the relevant national competent authority (in Denmark: the Danish Financial Supervisory Authority (DFSA)) whenever a net short position reaches, exceeds, or falls below the threshold of 0.2% of the issued share capital of the company. As a consequence of the ESMA decisions, the threshold is until 17 September lowered to 0.1%.
The obligation to notify also applies to each 0.1% increment above that, e.g. a short position of 0.12% of a company’s share capital which is increased to 0.21% also has to be notified.
In addition, when a natural or legal person exceeds, reaches or falls below a net short position of 0.5% of the issued share capital of a company with shares admitted to trading on a regulated market and each 0.1% threshold above that, such person shall make a public announcement of its net short position. No change has been made to this threshold for now.
The deadline for the notification is 3.30 pm CET on the following trading day for reaching the net short position.
Net short position holders in companies admitted for trading on Nasdaq Copenhagen must submit the notifications to the DFSA. See further guidance here.
The measure imposed by ESMA on 16 March 2020 addressed the necessity for national competent authorities and ESMA to be able to monitor the net short positions that market participants have entered into in relation to shares admitted to trading on a regulated market, on account of exceptional circumstances present in financial markets due to COVID-19. Our newsletter on the original decision from 16 March 2020 is available here.
The decision to renew the lowered reporting threshold is linked to the exceptional circumstances of COVID-19 to allow for authorities to monitor developments in markets, as the COVID-19 pandemic continues to have serious adverse effects on the economy in the EU with any outlook for a future recovery remaining uncertain. While EU financial markets have partially recovered losses since 16 March 2020, this uncertainty is also affecting their future development.
While the lowered reporting threshold is applicaple for net short position holders in shares traded on Nasdaq Coepnhagen A/S, it is worth noting that Denmark has not imposed an actual ban on short positions during the COVID-19 crisis as was the case in a number of southern and middle European countries including Austria, Belgium, France, Greece, Italy and Spain.