Short-selling bans and calculating short selling positions

In response to the impact of the Covid-19 outbreak, various EU countries have imposed temporary short-selling bans applying to both physical and derivative positions.

Short-selling bans

Jurisdiction	Length of ban	Application
Austria	Applies from 18 March 2020 until the end of the day on 15 April 2020 (this was due to apply until 18 April 2020, but was shortened by the extension, referred to below) Extended to apply from 16 April 2020 until the end of 18 May 2020	The extended ban prohibits shorting or increasing existing net short positions in all shares admitted to trading on the Vienna Stock Exchange and which fall under the supervisory authority of the Austrian Financial Markets Authority. The ban applies to all basket and index-related instruments for which the shares subject to the ban make up 50% or more of the index or basket by value. However, the ban does not apply to short positions when the short position is aimed exclusively at covering the risk stemming from (i) the equity component of a previously purchased convertible bond, or (ii) previously purchased subscription rights. View the Austrian legislation imposing the ban and the initial ESMA opinion. View the English translation of the Austrian legislation extending and amending the ban, the ESMA opinion and FAQs.
Belgium	Initial one-day ban on 17 March 2020 Extended to apply from 18 March 2020 until 17 April 2020 Further extended to apply from 17 April 2020 at 00:00:01am until 18 May 2020 at 11:59pm	The further extended ban prohibits shorting or increasing existing net short positions in all companies listed on Euronext Brussels and Euronext Growth. The ban applies to index-related instruments and baskets of financial instruments if the shares subject to the ban represent more than 50% of the index or the basket weight (prior to the publication of the extension of the ban on 15 April 2020, the threshold for the ban to apply to index-related instruments was that the shares subject to the ban represented more than 20% of the index weight). However, the ban does not apply to shorting or increasing existing net short positions (amongst others) (i) when the investor who acquires a convertible bond has a delta-neutral position between the equity component of the convertible bond and the short position taken to cover that component, or (ii) where the creation of, or increase in, the short position in shares is hedged by a purchase that is equivalent in terms of proportion of subscription rights. View the resolution of the Financial Services and Markets Authority and the initial ESMA opinion. View the resolution of the Financial Services and Markets Authority further extending the ban and the ESMA opinion.
France	Initial one-day ban on 17 March 2020 Extended to apply from 18 March 2020 at 00:00 hours until 16 April 2020 at midnight Further extended to apply from 17 April 2020 at 00:00 until 18 May 2020 at 23:59pm	The further extended ban prohibits shorting or increasing existing net short positions in all shares listed on a French trading venue where such shares fall under the jurisdiction of the Autorité des Marchés Financiers. The ban applies to indexed financial instruments or baskets of shares if the shares subject to the ban represent 50% or more of the composition of the index or basket. However, the ban does not apply to shorting or increasing existing net short positions when the short position is aimed exclusively at covering the risk stemming from (i) the equity component of a previously purchased convertible bond, or (ii) previously purchased subscription rights. View the decision of the Autorité des Marchés Financiers and the initial ESMA opinion. View the decision of the Autorité des Marchés Financiers further extending the ban, the ESMA opinion and FAQs.
Greece	Applies from 18 March 2020 at 00:00:01 hours (CET) until 24 April 2020 at 24:00:00 (CET) Extended to apply from 25 April 2020 at 00:00:01 hours (CET) until 18 May 2020 at 24:00:00 (CET)	The extended ban prohibits shorting or increasing existing net short positions in all shares admitted to trading on the Athens Stock Exchange. The ban applies to index derivatives if the shares subject to the ban represent more than 50% of the index weight. View the decision of the Hellenic Capital Market Commission and the initial ESMA opinion. View the decision of the Hellenic Capital Market Commission further extending the ban, the ESMA opinion and FAQs.
Italy	Initial one-day ban on 13 March 2020 and 17 March 2020 Extended to apply from the start of the trading day on 18 March 2020 until the end of the trading day on 18 June 2020	The extended ban prohibits shorting or increasing existing net short positions in any of the shares included in Attachment no. 1 of the resolution (see link below). The ban applies to all index-related instruments for which the shares subject to the ban make up more than 20% of the index. However, the ban does not apply to shorting or increasing existing net short positions when the short position is aimed exclusively at covering the risk stemming from (i) the equity component of a previously purchased convertible bond, or (ii) previously purchased subscription rights. View the resolution of the Commissione Nazionale per le Società e la Borsa, the ESMA opinion and FAQs.
Spain	Initial one-day ban on 13 March 2020 Extended to apply from 17 March 2020 until 17 April 2020 Further extended to apply from 18 April 2020 until 18 May 2020 (inclusive)	The further extended ban prohibits shorting or increasing existing net short positions in all shares admitted to trading on Spanish venues. The ban applies to derivative financial instruments on index derivatives or weighted baskets of financial instruments where the weight of the securities affected by the ban exceeds 50% of the index or basket. The ban also applies to spot transactions, derivatives traded on trading venues, or OTC derivatives which create or increase a net short position, even intra-day, as well as short sales even if they are hedged by securities lending. However, the ban does not apply to shorting or increasing existing net short positions (i) when the investor who acquires a convertible bond has a delta-neutral position between the equity component of the convertible bond and the short position taken to cover that component, or (ii) where the creation of, or increase in, the short position in shares is hedged by a purchase that is equivalent in terms of proportion of subscription rights. View the statement of the Comisión Nacional del Mercado de Valores and the initial ESMA opinion. View the statement of the Comisión Nacional del Mercado de Valores further extending the ban, the ESMA opinion and FAQs.

The EU Short Selling Regulation (Regulation (EU) No 236/2012 on short selling and certain aspects of credit default swaps, Article 24) provides that the relevant national regulators may renew bans for further periods not exceeding three months if the grounds for taking the measure continue to apply.

At this stage, following a statement by the UK Financial Conduct Authority (FCA) on 17 March 2020, we do not anticipate an extended short-selling ban in the UK.

Calculation of short positions: a reminder

Following decisions by ESMA and the EFTA Surveillance Authority requiring net short positions of 0.1% and above to be reported, managers may need to review how they calculate and report their short positions. As such, managers should remind themselves of the following:

Derivative and physical positions should be aggregated when reporting. Both physical and derivative positions are considered “short positions” under the EU Short Selling Regulation, and no distinction should be made in reporting those positions;
Care should be taken with synthetic shorts. If you have a net short position attributable to long cash and short swap (including long or short positions in American or Global Depositary Receipts) on the same issuer in respect of which there is a ban, you may not be allowed to sell the long position (as this would increase your net short position); and
Check how reporting should be undertaken. In February 2020, the FCA updated its note on how to notify it of net short positions. Information in respect of other national competent authorities may be found in ESMA’s note. In addition, on 31 March 2020, the FCA confirmed that the necessary reporting system changes, to match ESMA’s requirement to report net short positions of 0.1% and above, have been made. This means that:
- the FCA has been ready to receive notifications at the lower threshold from Monday 6 April 2020. It also confirmed that firms are not required to amend and resubmit notifications submitted between 16 March 2020 and 3 April 2020;
- firms should make best efforts to report at the lower threshold from Monday 6 April 2020. However, the FCA says it appreciates that it may not be possible for some firms to amend their systems by this date. If this is the case, firms are asked to contact PMU@fca.org.uk to discuss further; and
- in line with the EU Short Selling Regulation, the new reporting obligation applies to shares for which the FCA is the relevant competent authority and not to exempted shares where the principal venue for the trading of the shares is located outside of the EU.