ESMA Lowers Reporting Threshold for Net Short Positions

The regulator has implemented the measures as a precautionary action regarding coronavirus.

The European Securities and Markets Authority (ESMA) announced this Monday that is has issued a temporary decision in which it has lowered the reporting threshold for net short positions as a precautionary action regarding COVID-19.

In particular, the European regulator now requires holders of net short positions in shares traded on an EU regulated market to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1 percent 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 European watchdog said today.

ESMA: the current situation is a serious threat

“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.”

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The lowered threshold is effective immediately, and holders who meet the criteria must notify NCAs of their relevant positions at the close of today’s trading session. While the measures apply to any natural or legal person regardless of where they are living, the measures 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.

Regulators try to stabilize financial market

ESMA’s measures follow on from the Australian Securities and Investments Commission (ASIC), also putting in place measures in response to coronavirus. As Finance Magnates reported earlier today, the Australian Securities and Investments Commission (ASIC) took steps to ensure that the country’s equity market remains resilient.

Specifically, ASIC has issued directions under the ASIC Market Integrity Rules to a number of large equity market participants. Specifically, they have been told to limit the number of trades executed each day until further notice. 

Under the watchdog’s directions, firms need to reduce their number of executed trades by up to 25 percent from the levels executed on Friday. Therefore, high volume participants and their clients will need to actively manage their volumes.

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