ESMA and ESA increase the short sale position reporting threshold from 0.1% to 0.2%

15 March 2021

On 15 March 2021, the European Securities and Markets Authority (ESMA) and the EFTA Surveillance Authority (ESA) announced that the temporary lowering of the threshold at which persons are required to notify their national competent authority of net short positions in companies whose shares are admitted to trading on a regulated market in the European Economic Area will not be renewed. As a consequence, the requirement to report net short positions greater than 0.1% of the issued share capital of those companies will expire on Friday 19 March 2021, and following this date will revert to a threshold of 0.2%. Reporting will still be required on a T+1 basis on Monday 22 March 2021 in respect of short positions in the range of 0.1% to 0.2% created on 19 March 2021.

The threshold for reporting short positions was initially reduced by ESMA and ESA on 16 March 2020 from 0.2% to 0.1% for a three-month period in response to market volatility in the early stages of the Covid-19 pandemic. ESMA and ESA had rolled this reduction in threshold forward for a further three months in each of June, September and December 2020. In coming to the decision not to roll the threshold forward once more, ESMA and ESA observed that volatility is decreasing and the main EEA stock indices are close to pre-pandemic levels, and so the current situation no longer justifies maintaining the measure.

This step is in contrast with the approach of the United Kingdom, which following the end of the Brexit transition period took the step of permanently lowering the threshold for reporting short positions to 0.1% issued share capital of companies whose shares are admitted to trading on a trading venue in the United Kingdom. This measure is contained in the Short Selling (Notification Thresholds) Regulations 2021, which came into force on 1 February 2021.