ESMA has issued a renewed decision, which requires net short positions holders to temporarily lower the reporting threshold from 0.2% to 0.1% in relation to shares traded on an EU regulated market. Accordingly, the temporary lowered threshold for reportings to the Danish Financial Supervisory Authority will apply for an additional three months from 18 September 2020 until 18 December 2020. The decision prolongs the authorities’ permission 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 temporarily requiring the holders of net short positions in shares traded on a EU regulated market, e.g. Nasdaq Copenhagen, to notify the relevant national competent authority if the position reaches or exceeds 0.1% of the issued share capital. This decision lowered the reporting threshold from 0.2% to 0.1%. The decision is available here and our newsletter on the original decision from 16 March 2020 is available here.
According to applicable EU legislation, ESMA is required to review this measure at appropriate intervals and at least every three months. Pursuant to this, ESMA decided to renew the decision to lower the reporting threshold for an additional three months on 10 June 2020. The decision prolonged the lowered reporting threshold until 17 September 2020. The decision is available here and our newsletter on the renewal of the original decision is available here.
As three months have passed since the decision of 10 June 2020 entered into force, ESMA has performed a review on the measure to lower the reporting threshold. In accordance with the results of the review, ESMA issued a decision on 16 September 2020 to extend the temporary lowered reporting threshold for an additional three months, which entails that the measure will apply from 18 September 2020 until 18 December 2020. The renewed decision is available here.
Due to the COVID-19 pandemic, ESMA considers that lowering the reporting threshold is a precautionary action that, under the exceptional circumstances, is essential for authorities to monitor developments in markets. The measure imposed by ESMA on 16 March 2020 adressed the necessity for ESMA, in coordination with national competent authorities, to to monitor developments in financial markets as a result of the COVID-19 situation in order to ensure the orderly functioning of EU markets, financial stability and investor protection.
The decision to renew the lowered reporting threshold on 16 September 2020 is linked to the exceptional circumstances of COVID-19, as a review performed by ESMA indicates that the COVID-19 pandemic continues to have an adverse impact on the real economy with the overall outlook for a future recovery remaining uncertain, particularly in light of recent developments in the EU and beyond. ESMA notes that the number of COVID-19 cases has significantly increased in several jurisdictions over the last few weeks, raising concerns about the possibility of a second wave of COVID-19 infections exacerbating the uncertainty of any future outlook.
While the lowered reporting threshold is applicaple for net short position holders in shares traded on Nasdaq Copenhagen 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.
Short positions triggering notifications: 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 18 December 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.
Short positions triggering public announcements: 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.
Deadline for notifications: The deadline for the notification is 3.30 pm CET on the following trading day for reaching the net short position.
National competent authority: Net short position holders in companies admitted for trading on Nasdaq Copenhagen must submit the notifications to the DFSA. See further guidance here.