EU Commission lowers notification threshold for net short positions

On 27 September 2021, the EU Commission published a Delegated Regulation regarding the adjustment of the relevant threshold for the notification of significant net short positions in shares.

This Delegated Regulation amends Article 5 (2) of the Regulation (EU) No 236/2012 ("Short Selling Regulation") by setting the threshold for the notification to competent authorities of significant net short positions in shares to 0.1 % of the issued share capital of the company concerned.

Under the Short Selling Regulation, such threshold was originally set to 0.2 %. However, during the COVID-19 pandemic, the notification threshold for net short positions in shares admitted to trading on a regulated market was lowered from 0.2 % to 0.1 % in order to be able to identify market developments more quickly. Since the Short Selling Regulation provides the opportunity for the European Securities and Markets Authority ("ESMA") to take emergency measures, such as lowering this threshold on a temporary basis, ESMA made use of its emergency intervention powers and issued a decision to lower the notification threshold temporary.

The last temporary measure by ESMA to lower the notification threshold expired on 19 March 2021. However, the events following the COVID-19 outbreak and the increased visibility obtained by competent authorities on volumes of net short positions have convinced ESMA to set the notification threshold at 0.1 % on a permanent basis.

Market participants should be aware that, in contrast to the temporary reduction to 0.1% a few months ago, the permanent notification threshold applies to issuers admitted to trading on a regulated market and to a multilateral trading facility ("MTF"). The threshold is, therefore, not only lowered for market participants that are listed on a regulated market in the EU.

The Delegated Regulation enters into force on the on the twentieth day following that of its publication in the Official Journal of the European Union.