On March 2, the Committee of European Securities Regulators (CESR) published proposals for a pan-European short selling disclosure regime. The proposals result from CESR’s consultation process, which began in July 2009 (see the July 10, 2009, edition of Corporate and Financial Weekly Digest).
CESR has proposed a two-tier model (private and public disclosure) for short positions in shares admitted to trading on any European Economic Area (EEA) regulated market or multilateral trading facility (MTF). The regime will not apply to shares whose primary listing is not on an EEA market or MTF. The measure of whether disclosure is required will be based on economic exposure (calculated on a net basis) which is the economic equivalent of a short position. Positions in all financial instruments, including derivatives and cash market positions, will be aggregated to determine whether applicable thresholds are met.
Market participants with short positions will be required to make a non-public disclosure (to the national regulator of the relevant issuer’s primary market) of any position in an issuer’s share capital reaching 0.2%—an increase from the originally proposed 0.1%. Further non-public disclosures will be required as each successive 0.1% threshold is crossed after the initial disclosure requirement has been triggered. If the higher threshold of 0.5% is reached, a public disclosure will also be required. Further public disclosures will be required for each 0.1% change thereafter. Disclosure filings will be required on T+1. Intra-day positions are not required to be disclosed. Market making activities will be exempt.
CESR has recommended that the new regime be implemented as soon as possible. Its view is that there should be new European legislation in this area, either (preferably) through the enactment of a new directive or regulation or alternatively through amendments to the Transparency Directive. It recommends that those CESR members that already have powers to implement a permanent disclosure regime should begin the process of implementing the proposals, while those members not having the necessary legal powers should aim at implementation on a best efforts basis.
To read the proposals in full, click here.