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BaFin introduces transparency system for net short-selling positions
Practical Law UK Legal Update 8-501-8562 (Approx. 3 pages)
BaFin introduces transparency system for net short-selling positions
by Sandra Pfister, Simmons & Simmons
| Published on 26 Mar 2010 • Germany |
This article is part of the PLC Global Finance March 2010 e-mail update for Germany.
Speedread
On 4 March 2010, the German Federal Financial Supervisory Authority (BaFin) issued a general decree under which participants must notify BaFin of net short-selling positions that reach, exceed or fall below 0.2% of the outstanding shares in specific financial sector companies and pursuant to which BaFin publishes, in an anonymised form, such positions once they reach, exceed or fall below 0.5% (Decree).
The Decree relates to net short-selling positions which reach, exceed or fall below 0.2% (rounded to two places after the decimal point) of the outstanding shares in the following companies (Relevant Companies) from the financial sector:
- Aareal Bank AG
- Allianz SE
- Generali Deutschland Holding AG
- Commerzbank AG
- Deutsche Bank AG
- Deutsche Börse AG
- Deutsche Postbank AG
- Hannover Rückversicherung AG
- MLP AG
- Münchener Rückversicherungs-Gesellschaft AG
The Decree provides for a two-tier transparency system: first, net short-selling positions of 0.2% or more of the outstanding shares of the Relevant Companies must be notified to BaFin. Further notifications are required when such positions reach, exceed or fall below a further 0.1%. In addition, BaFin will arrange for publication on its homepage of net short-selling positions that reach or exceed 0.5%.
In addition to covered and uncovered short-selling transactions in the Relevant Companies' shares, the Decree also applies to other positions of financial instruments traded on the stock exchange or over-the-counter which ultimately correspond to a short-selling position in shares (for example, sale of futures, purchase of put options, contracts for difference, regardless of whether physical delivery or cash settlement takes place).
To the extent that the respective transaction is necessary for the performance of its contractual obligations, trades by market makers (that is, persons who have undertaken by contract to purchase or sell financial instruments on a continuous basis by way of trading for their own account at prices defined by them) are exempted from the Decree.
The notification period and publication period begins when the holder learns or, in consideration of the circumstances, should have learned, that the level of its net short-selling position has reached, exceeded or fallen below the thresholds set out above. Moreover, on the effective date of the Decree (that is, 25 March 2010 at 0:00), the holder of a net short-selling position of 0.2% or holders or net short-selling positions of 0.5% or more must make the corresponding notifications to BaFin.
The Decree enters into force on 25 March 2010 and will apply until 31 January 2011.
Note that the Decree is still subject to revocation under the German Administrative Procedures Act (Bundesverwaltungsverfahrensgesetz).