Published: 2nd November 2012

As was mentioned in Regulatory Roundup 43, new, EU driven, short selling rules came into force in the UK from 1 November.

In brief, the regulations (EU 236/2012) place restrictions on uncovered short positions in: sovereign debt (see Article 13(1) with limited exemption set out in Article 13(2)); shares admitted to trading on a trading venue (Article 12); and sovereign CDS (Article 14(1)). Please see Regulatory Roundup 43 for further details including disclosure levels.

Notifications (private to the regulator) and Disclosures (to the public at the 0.5% level) must be made by 3:30pm local time in the jurisdiction of the relevant trading venue of the instrument following the trading day on which the threshold was reached. All calculations should be made as at midnight of the relevant day. The first disclosures in the UK will be required by 3:30pm on 2 November 2012. This will include positions generated before 1 November if still held on that date.

Notification of net short position thresholds for sovereign issuers are more complex in terms of initial threshold and incremental threshold; ESMA has produced a list of the different thresholds for each Member State which can be found using the link provided.

Disclosure, both private and, where relevant, public, can be made by email using the links found on the FSA website (see link provided). The new forms are also available from here.

Note that the first time that a disclosure is made the FSA require a signed letter on printed headed paper, including address, outlining the contact details of those individuals who will be notifying the positions.

The following Articles do not apply to shares of a company admitted to trading on a trading venue in the Union where the principal venue for the trading of the shares is located in a third country: Article 5 (Notification to competent authorities of significant net short positions in shares); Article 6 (Public disclosure of significant net short positions in shares); Article 12 (Restrictions on uncovered short sales in shares); and Article 15 (Buy-in procedures).

ESMA has produced a list of exempted shares (see link).

Definitions of terms used, including ‘relevant competent authority’ can be found in Article 2. ESMA has produced a Q&A document on the new regime which can be found using the link provided.

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