Tuesday April 2 2013
News Source: Global Disclosures
Focus: Short Selling
Type: General
Country: Japan
Further to the update of 8 March, the Japanese FSA has published a English language version of its draft revision to the Japan short selling regulation. Going forward, revisions to the relevant cabinet orders and cabinet office ordinances will be made. A draft revision to relax the restrictions concerning share buybacks has also been published.
Notification from 0.2%
The FSA is proposing to introduce a permanent disclosure regime, with reporting required on a short position reaching 0.2% of the issued shares. Filing of an amended report would be required at every 0.1 percent increments thereafter, as well as on falling below the 0.2% threshold.
Disclosure from 0.5%
Public disclosure would be required on reaching 0.5% as well as on falling below the initial threshold.
Reporting
The existing rules require the reporting and public disclosure of short positions arising from exchange transactions only. This requirement will be revised to include reporting and public disclosure for all short positions. The holder of a short position will report the short position and other related information to the exchange via the member of the exchange, and the exchange will publicly disclose such information.
Uptick rule
Under the current rules, the uptick rule applies at all times. Going forward, a framework whereby the uptick rule is applied only when the price falls below a certain threshold (10% fall in price relative to the previous day`s closing price) will be adopted.
Proprietary trading system
Transactions executed in the proprietary trading systems (PTS) (executed only under the auction method, customer order matching method, or market making method) will be added to the scope of the regulation.
Prohibition on naked short selling
A permanent prohibition will apply. Transactions executed in PTS (executed only under the auction method, customer order matching method, or market making method) will be included in the scope of the naked short selling prohibition.
Other restrictions
PTS (only for auction method, customer order matching method, or market making method) will also be subject to short selling regulation requirements such as verification and flagging requirements, and short selling restrictions during public offering.
Exemptions
The FSA will review the exemptions under the short selling measures:
- Arbitrage trades between exchange and PTS will be excluded from the regulation
- Transactions currently excluded from the regulation, such as hedge selling relating to ETF exchanges and purchases, that are only allowed for certain ETFs, will be expanded to all ETFs
- Transactions which in reality is a customer order for short selling that would have been subject to regulation falsely appear as an actual sale in the security firm`s house account, will be captured
The document also provides some guidance on the method of calculating a short position.
The FSA intends to implement the above revisions by November 2013. In the meantime, temporary measures that are due to expire at the end of April will be extended until the above revisions have been implemented.
Click on the above link for the draft measures.