The Committee of European Securities Regulators (CESR) has published a consultation paper stating that short sellers of equities would have to make a public disclosure of their positions if they breached a threshold of 0.5% of the companys issued share capital.
According to a statement by CESR: When a short position reaches a specified initial threshold, the short seller would be obliged to make a private disclosure to the regulator of the most liquid market for the share in which the position was held. The private disclosure threshold is proposed to be set at 0.1% of the companys issued share capital. If the position reached a second-tier threshold, that of 0.5%, the short seller would be required to publicly disclose its position to the market as a whole. Any further private or public disclosures would then be required if the short positions subsequently crossed the incremental threshold of 0.1%. A private or public disclosure would also be necessary if the positions fell below any of the trigger thresholds, including the initial trigger thresholds of 0.1% and 0.5%.
Kurt Pribil, Executive Director of the Austrian Finanzmarktaufsicht (FMA) and Chair of CESR-Pol stated: Requiring the reporting of significant short positions to the regulators would better enable them to identify which market participants are taking the lead in shorting financial instruments and, when necessary, to pursue enquiries with participants suspected of abusive short selling. Imposing a requirement for short positions to be disclosed publicly to the market as a whole will provide a potential constraint on aggressive large-scale short selling. We believe the combination of these two measures is a balanced solution, which recognises that short selling can sometimes be beneficial, whilst also ensuring that its potentially negative consequences are sufficiently contained.
The ruling would apply to shares admitted to trading on an EEA regulated market or on a multilateral trading facility.
The 0.1% reporting threshold is significantly lower than the 0.25% limit proposed by UK regulators.