EUROPEAN UNION: ESMA issue opinion on renewal of Greek short selling ban

Tuesday August 4 2015

The European Securities and Markets Authority have issued their official opinion concerning the renewal of the emergency measure by the Greek HCMC under Section 1 of Chapter V of Regulation No 236/2012 on short selling and certain aspects of credit default swaps.

ESMA’s opinion is as follows:

On the adverse events or developments. ESMA considers that adverse developments which constitute a serious threat to market confidence in the Greek market still persist. Despite the partial reopening of credit institutions on 20 July 2015, and the reopening on 3 August 2015 of the ATHEX regulated market, the Multilateral Trading Facility of ‘EN.A’, and of the Secondary Market ‘HDAT’ for government bonds, the situation of fragility in the financial system and in the Greek economy persists.

On the appropriateness and proportionality of the measure. ESMA considers that the measure is appropriate and proportionate to address the above mentioned threats that persist in the Greek financial markets. Allowing short positions to be built at this stage could exacerbate the threats to financial stability, especially as regards the financial sector. The new exemption foreseen for market making activities is justified by the fact that Greek financial markets are now open, and therefore market makers should be allowed to properly carry out their activity, thus enhancing the liquidity on the Greek shares and related instruments, and contributing to the normalisation of the activities on the Greek financial markets.

On the duration of the measure. ESMA considers that the duration of the measure is justified. In the previous extensions, measures were always proposed for a seven day period each, considering that the moment in which the Greek financial markets would have reopened was not known at that time. This is no longer the case, since Greek financial markets have reopened after more than one month.

Under these circumstances, ESMA considers it is necessary and appropriate for HCMC to impose a net short position ban that would last until the end of the month, in view of supporting the proper functioning of the Greek financial markets in this transitional period. Besides, ESMA takes into consideration HCMC’s statement in its notification of intent that the measure may be lifted before the end of the established period or renewed in accordance with the provisions of Regulation (EU) No 236/2012 if circumstances that justified the imposition of the measure improve, persist or worsen.

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