On 2 March 2010 the Committee of European Securities Regulators (CESR) published a feedback statement in response to comments received following publication in July 2009 of its consultation paper on the proposal for a mandatory pan-European short selling disclosure model and a subsequent report containing its proposed model, which has been submitted to the European Commission. CESR has also published its covering letter to the European Commission. CESR recommends the introduction of a pan-European disclosure regime for net short positions in shares.
CESR proposes a two-tier model involving a mixture of public and private disclosures for the disclosure of significant individual net short positions in all shares that are admitted to trading on an EEA regulated market and/or an EEA Multilateral Trading Facility where their primary market is located in the EEA. Under CESR’s proposals:
- At the lower threshold, positions should be disclosed to the relevant competent authority. The lower threshold obligations are triggered when the net short position reaches 0.2 per cent of the company’s issued share capital.
- If the short position then reaches the second, higher threshold, an obligation to make a public disclosure, in addition to a disclosure to the regulator, would be triggered. CESR proposes to set this public disclosure threshold at 0.5 per cent.
- For both the private and public disclosure regimes, further disclosure obligations would be triggered at each subsequent increment of 0.1 per cent (either up or down) after the initial disclosure obligation has been incurred. Private disclosure would therefore be triggered when the short position reaches 0.2 per cent, 0.3 per cent and 0.4 per cent. Public disclosure would be triggered at 0.5 per cent, 0.6 per cent, 0.7 per cent, etc. Disclosure is also required at the point at which the short position falls below any of the trigger thresholds.
- CESR members may choose to publish aggregated data that they receive as a result of private disclosures, although this is an optional element of the proposed regime.
- Short positions should be calculated on a net basis as this means that a more accurate picture of the short position would be disclosed. The calculation should not be limited to cash equity markets, but should extend to positions in linked derivative contracts, indices, baskets and exchange traded funds.
- Disclosure reports of short positions, whether to the regulator or the market, would be made on the trading day following the day on which the trigger threshold is crossed.
- Disclosures should contain the identity of the short position holder, the identity of the issuer, the size of the position held and the date on which the position was created or was no longer held.
- Market makers should be exempted from the disclosure regime. CESR will therefore develop a clear definition of ‘market maker’ for the purposes of the regime to ensure that only genuine market makers are exempted.
CESR recommends that the regime be implemented as soon as possible and that, in the meantime, CESR members that already have the powers to implement a permanent disclosure regime should seek to do so. All other members should seek to implement the regime on a best efforts basis until the European regime is adopted.