CONTEXT
Within the context of the exceptional circumstances linked to the ongoing COVID-19 pandemic, the European Securities and Markets Authority (ESMA) had considered on 16 March 2020, as a precautionary action aimed at allowing authorities to monitor developments in markets, to temporarily require holders of net short positions in shares traded on a European Union (EU) regulated market to notify the relevant national competent authority (NCA) if the position reaches or exceeds 0.1% of the issued share capital.
A that time, ESMA considered that the existing circumstances constituted a serious threat to market confidence in the EU and that the measure was appropriate and proportionate to address the threat level to EU financial markets.
RENEWAL
Such ESMA’s decision, reconducted several times, was lastly renewed on 19 December 2020 for a three months period coming to an end on 19 March 2021.
DECISION
The decreasing volatility and the main EU stock indices being close to pre-pandemic levels have let the ESMA to the conclusion that the current situation in financial markets no longer resembles the emergency situation as in March 2020. Additionally, the level of net short positions decreasing across the EU reduces the risk that selling pressures could initiate or exacerbate potential negative developments connected with the evolution of the pandemic justifying this position of the ESMA.
ENTRY INTO FORCE
Considering ESMA’s decision, 19 March 2021 will be the last date for the reporting where the lower threshold of 0.1% applies. As from 20 March 2021 onwards, positions holders will need to send notifications only if they reach or exceed the 0.2% threshold again, while any outstanding net short position between 0.1% and 0.2% will not have to be reported.
ESMA, in coordination with NCAs will continue to monitor developments in financial markets as a result of the COVID-19 pandemic, and is prepared to use its powers to ensure the orderly functioning of markets, financial stability and investor protection.
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