The Committee of European Securities Regulators (CESR)1 has recommended the introduction of a pan-European disclosure regime requiring investors to report net short positions to the relevant regulator privately and to the market publicly. The regime will cover short positions in all shares that are admitted to trading on a European Economic Area regulated market or multilateral trading facility, unless the primary market for the shares is located outside the EEA (Relevant Shares). The recommendation follows an extensive consultation process launched in July 2009. Michel Barnier, EU internal market commissioner, recently confirmed that the European Commission would now push forward with EU-wide legislation to implement the recommendation.
Two-Tier Disclosure Regime
The disclosure regime proposed is a two-tier model for disclosure of significant net short positions in Relevant Shares by investors. The scope will not be limited by industry or type of share.
Disclosure would be at two levels:
positions of 0.2 percent of the relevant company's issued share capital or above would be disclosed privately to the relevant regulator (which in the UK would be the Financial Services Authority); positions of 0.5 percent or above would be disclosed both privately to the regulator and publicly to the market as a whole. All changes of position up or down would be reported at increments of 0.1 percent, first to the regulator privately (at 0.3 percent and 0.4 percent) and then publicly to the regulator and market at 0.6 percent, 0.7 percent etc.
The regime will cover not simply short positions in the cash markets but "any transaction that provided an economic exposure to a particular share", e.g., exchange traded and OTC derivatives. Short positions are to be calculated on a net basis, with disclosure reports being made on the trading day following the crossing of the relevant threshold.
The required disclosures would include the identity of the short position holder and the issuer, the size of the position and the date on which the position was created or no longer held. CESR is still working on the mechanics of disclosure.
Market makers will be exempt when genuinely acting as such.
In addition, CESR considers each regulator should be empowered to choose to publish aggregated data they receive from private disclosures.
The regime is similar to the current UK regime where FSA requires public disclosure of short positions of 0.25 percent in financial...