GERMANY: Upcoming entry into force of new Germany short selling disclosure requirements

Tuesday March 20 2012

Effective 26 March 2012, new provisions on the disclosure of net Germany short-selling positions will enter into effect. The measures will apply to all shares admitted to trading on the regulated market of a German stock exchange

The holder of net short positions must notify BaFin by the end of the next trading day at the latest if its net short position reaches, exceeds or falls below the threshold of 0.2% of a company’s shares in issue if the shares are admitted to trading on the regulated market of a German stock exchange.

If the net short positions reach, exceed or fall below a threshold of 0.5%, the person/entity subject to the notification requirement must itself additionally publish these positions in the electronic Federal Gazette. This publication must also take place by the end of the next trading day.

After a notification has been submitted, a further notification must be submitted after the position reaches, exceeds or falls below an additional 0.1 percentage points or a multiple thereof.

A net short position arises if the aggregation of the holder’s financial instruments results in a net exposure on the short side. Such aggregate economic interest (economic exposure) is subject to the notification requirement (and where applicable additionally to a publication requirement) when the thresholds specified in section 30i of the WpHG are exceeded.

Net short positions must be notified by the end of the next trading day after they arise (and, where required, also published by then); only the net short position at the end of the respective trading day is decisive.

The reporting requirement covers short positions in the share itself, and likewise as a rule all derivative positions in financial instruments whose performance is dependent on the performance of the respective share. That means that in particular option transactions, swaps and financial instruments that are based on indices and baskets and at least partly include the specified stocks, as well as such shares in exchange-traded funds (ETFs), must be included in the calculation.

The inclusion of derivative financial instruments applies regardless of whether these instruments were traded in Germany or abroad on a regulated market, a multilateral trading facility (MTF) or over-the-counter (OTC). In this regard it also does not matter whether the respective transaction is for physical delivery or settlement in cash. Any existing securities lending and loan transactions as well as repurchase transactions (repos) are not to be included. Open positions under transactions concluded by trading participants with a customer for settlement of a transaction in shares concluded at a fixed or definable price (fixed price transaction) are also to be included in the calculation. Subscription rights are also included since these likewise represent an economic interest in the share.

The first notification or publication relates to net short positions existing or having arisen on 26 March 2012. These must be notified by the end of 27 March 2012 and, to the extent they are subject to a publication requirement, also published within such period. No requirement to notify and publish a net short position pursuant to section 30i of the WpHG exists if a comparable notification has already been submitted prior to 26 March 2012 (section 42b of the WpHG) and the position has not changed to such extent that a threshold event has occurred as a result of the change. Subsequent changes must be notified in accordance with the provisions of section 30i of the WpHG and the Regulation on Net Short Positions.

For notifications, BaFin makes available an electronic notification procedure by means of the Reporting and Publishing Platform (Melde- und Veröffentlichungsplattform – MVP) accessible via the Internet. Publications,however, are to be made in the electronic Federal Gazette.

Click on the above link for more detail.