As market volatility has increased in the wake of the Covid-19 outbreak, several competent authorities have imposed bans on short sales in certain shares.
Approach taken by the Financial Conduct Authority (the FCA)
To date, the FCA has introduced only temporary prohibitions on short selling in certain listed instruments, on the 13 and 17 March 2020, as set out below. It has not introduced outright bans that are reciprocal to the approach taken by other regulators, and this is consistent with its policy to assist other regulators rather than imposing its own bans on the short selling of UK shares. The FCA’s focus is on maintaining open markets that operate with integrity and in its view, an ability to short sell can contribute to this. A summary of the FCA’s approach is available (here).
|Scope of restriction||Commencement||Expiration|
|Temporary prohibition on short selling||13 March 2020||13 March 2020|
|Temporary prohibition of short selling||17 March 2020||17 March 2020|
On 31st March, the FCA issued a statement (found here) confirming that ESMA’s decision of 16 March (described below) also applies in the UK, and that the required changes to the FCA’s systems have now been made. The FCA will be ready to receive notifications at the lower threshold of 0.1% from Monday 6 March 2020. Firms are not required to amend and resubmit notifications submitted to the FCA between 16 March 2020 and 3 April 2020. The FCA expects firms to make best efforts to report at the lower threshold from this date. However, the regulator appreciates that it may not be possible for some firms to amend their systems by this date. If this is the case, please contact PMU@fca.org.uk to discuss further.
Approach taken by other competent authorities
To date, several other competent authorities have introduced short selling restrictions, and we set out below a summary of these developments. It is worth noting that to date, and by way of example, the regulators in Canada, Hong Kong, Luxembourg and the USA in particular, have not taken similar steps.
|Jurisdiction and link to announcement||Scope of restriction||Commencement||Expiration|
|Austria||All shares admitted to trading on the Vienna Stock Exchange and for which the Austrian FMA is the relevant competent authority||25 March 2020||18 April 2020|
|Australia||The Australian Securities & Investments Commission (ASIC) has not yet implemented changes to the short selling regime but the ASIC announced in a media release on 16 March that it had taken steps to ensure equity market resilience. The ASIC has also issued directions under the ASIC Market Integrity Rules to a number of large equity market participants, requiring those participants to limit the number of trades executed each day until further notice. These directions require those firms to reduce their number of executed trades by up to 25% from the levels executed on Friday 13 March.|
|Belgium||All shares listed on Euronext Brussels and Euronext Growth and for which the FSMA is the relevant competent authority||18 March 2020||17 April 2020|
|France||All shares admitted to trading on French trading venues, as well as all related instruments||18 March 2020||16 April 2020|
|All shares listed on the Athens Stock Exchange for which the Hellenic Capital Market Commission is the competent authority, as well as all related instruments||18 March 2020||24 April 2020|
|Italy||The list of identified shares, which are listed in Italy, as well as all related instruments||18 March 2020||18 June 2020|
|South Korea||All shares listed on KOSPI/ KOSDAQ/ KONEX||16 March 2020||15 September 2020|
admitted to trading on Spanish trading venues, as well as all related instruments
|17 March 2020||17 April 2020|
|Turkey||All shares listed on Borsa Istanbul||28 February 2020||No specified end date|
|Announcement||Scope of restriction||Commencement||Expiration|
|The European Securities and Markets Authority (ESMA)|
|Notification obligation where holding exceeds 0.1%||ESMA has issued a decision temporarily requiring the holders of net short positions in shares traded on an EU regulated market to notify the relevant national competent authority if the position reaches or exceeds 0.1% of the issued share capital after the entry into force of the decision. This is a reduction from the previous threshold of 0.2%.||25 March 2020||18 April 2020|