Regulators Send Reminders About Short Selling

Regulators Send Reminders About Short Selling

Earlier this month, the French regulator, Autorité des Marchés Financiers (AMF) issued a reminder to the market about bearish speculation provisions in its short selling regulations. Specific to their call-out was the dissemination of bearish speculation via the internet and social networks. We are reminded on a fairly regular basis how share prices and markets are influenced by information spun out to the internet.  The most recent example of this is Elon Musk’s surprise tweet on 7 August where he said that he was thinking of taking the company private. This sent Tesla’s share price higher and put Elon in the cross hairs with the SEC.

It is clear that regardless of market or regulator, this type of dissemination of information, be it bull or bear, will give the appearance of market abuse and will be scrutinize by the local regulator. The AMF reminded the market that it is forbidden to disseminate information – be it via the media, including internet, or any other channel – that gives or is likely to give false or misleading signals and to check the credibility and accuracy of the information.

Further to their point on dissemination of information, they also reiterated the European regulation on short selling which forbids the short sale of a share without having borrowed it or having taken measures necessary to have a reasonable expectation that settlement can be effected when due.  Specific to France, Article 223-37 of the AMF General Regulation states that any short position equal or superior to .2% of the capital of a company must be declared to the AMF. The same reporting requirement applies in the event that one of the successive additional thresholds set by levels of .1% is crossed upwards or downwards. Where the net short position reported is equal or superior to .5% of the capital, the AMF publicly discloses this information.

While we’re on the subject of short selling, it would be good to remind our customers that from 1 October 2018, the short selling reporting requirement in Singapore comes in to effect. The Monetary Authority of Singapore (‘MAS’) in an attempt to create greater transparency, will require investors to report their short positions and short sell orders in securities listed on the Singapore Exchange (SGX). With this new requirement, comes a new online portal, Short Position Reporting System (SPRS) to facilitate the reporting.

What you need to know about the short selling reporting requirement:

  • Threshold: The lower of:
    (a) 0.2% of the total issued shares in the relevant class of shares or units in the relevant class of units of a business trust or real estate investment trust; or
    (b) SGD2million in aggregated value (closing price on position day).
  • Calculation:
  • Time to Disclose: 2 trading days
  • How to Disclose: use the specific form and submit via the SPRS from 1 October onwards.

And while we bring this to your attention, you can sit back and relax as the Regulatory Reporting System (RRS) has been in compliance with this rule for several months now. We even got the xml submission form locked and loaded. With RRS you can focus your attention to more pressing matters while it does the heavy lifting.