Esma puts new leash on shorting in response to coronavirus
The European Securities and Markets Authority (Esma) has issued a decision temporarily requiring the holders of net short positions in shares traded on a European Union regulated market to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1% of the issued share capital.
The decision comes as stock markets globally have been further hit by fears of uncertainty sparked by the coronavirus and associated Covid-19 disease. Markets have continued to fall despite the announcement yesterday, 15 March, that the Federal Reserve and other central banks are coordinating action to ensure sufficient liquidity remains in the global financial system. Short sellers can make money while markets are falling.
Esma said that lowering the reporting threshold "is essential for authorities to monitor developments in markets."
"The measure can support more stringent action if required to ensure the orderly functioning of EU markets, financial stability and investor protection."
"Esma considers that the current circumstances constitute a serious threat to market confidence in the EU, and that the proposed measure is appropriate and proportionate to address the current threat level to EU financial markets."
Net short position holders must notify their NCAs of their relevant positions at the close of trading on Monday 16 March. The requirement applies regardless of country of residence, however, they "do not apply to shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country, market making or stabilisation activities."
"Esma, in coordination with NCAs, continues to monitor developments in financial markets as a result of the Covid-19 situation and is prepared to use its powers to ensure the orderly functioning of EU markets, financial stability and investor protection."
This article was first published by InvestmentEurope
Subscribe to International Investment's free, twice-daily, newsletter
More on Capital Markets
