ESMA lowers reporting threshold for net short positions in shares

Maria Nikolova

ESMA considers that lowering the reporting thresholds is a preliminary action that, under the current exceptional circumstances, is essential to monitor developments in markets.

The European Securities and Markets Authority (ESMA) today issued a decision lowering the reporting threshold for net short positions in shares traded on a European Union (EU) regulated market. The holders of net short positions in such shares will be required to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1% of the issued share capital after the entry into force of the decision.

ESMA considers that lowering the reporting threshold is a precautionary action that, under the exceptional circumstances linked to the ongoing COVID-19 pandemic, is essential for authorities to monitor developments in markets.

The regulator believes 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.

The measure is effective immediately, requiring net short position holders to notify NCAs of their relevant positions as at the close of the trading session on March 16, 2020 (Monday). The temporary transparency obligations apply to any natural or legal person, irrespective of their country of residence. 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.

Let’s recall that last week ESMA issued a set of recommendations for financial market participants regarding COVID-19. The regulator advised all financial market participants, including infrastructures to be ready to apply their contingency plans, including deployment of business continuity measures, to ensure operational continuity in line with regulatory obligations.

Further, issuers should disclose as soon as possible any relevant significant information concerning the impact of COVID-19 on their fundamentals, prospects or financial situation in line with their transparency obligations under the Market Abuse Regulation.

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