Short Selling Regulation: New notification requirements - 12/10/2012
As of 1 November 2012, following the application of EU Regulation, investment funds will be required to notify their competent authorities and to disclose to the public their net short positions when exceeding predefined thresholds in relation to:
- Financial instruments whose principal trading venue is located in the EU and any exposure acquired through related derivatives: notification threshold shall be 0.2% of the issued share capital and each 0.1% above that, disclosure threshold 0.5%, and each 0.1% above that; and
- Debt instruments issued by a Member State, the Union or EU supranational entities and any exposure acquired through related or referenced derivatives: notification threshold shall be 0.5% of the outstanding issued sovereign debt when this amount is above 500 billion euros or where there is a liquid futures market for the particular sovereign debt, 0.1% otherwise.
When exceeding these thresholds, notification will be required before 15.30 on the following trading day.
The Regulation will generally ban uncovered short sales in shares or EU sovereign debt as well as uncovered long positions in EU sovereign CDS.
Although not new in some European countries, the daily calculation (e.g. monitoring of exempted shares list, look-through of derivatives, correlation tests, aggregation at fund or asset manager level) and notification requirement brought by the Regulation may be challenging.
In order to assist you in meeting these new requirements, our experts can:
- Perform an impact analysis of the notification and disclosure thresholds on your activities;
- Review and perform a gap analysis of your calculation and notification process;
- Support you in the development of your in-house calculation and notification process;
- Outsource your daily calculation of net short positions and aggregation at the appropriate level; and
- Facilitate dedicated workshops on the topic.
Should you need to receive more information, please do not hesitate to contact our experts.
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