GREECE: HCMC Publishes ESMA Opinion on Greek Short Selling Ban

Thursday October 15 2015

On 14th October 2015, the Hellenic Capital Market Commission (HCMC) published the European Securities and Markets Authority (ESMA) opinion on the emergency measure by the Greek HCMC under Section 1 of Chapter V of Regulation (EU) No 236/2012 on short selling and certain aspects of credit default swaps.

According to Article 27(2) of Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (the Regulation), ESMA shall within 24 hours of the notification having been made by a competent authority under Article 26 of the Regulation issue an opinion on whether it considers the measure or proposed measure necessary to address the exceptional circumstances.

ESMA’s competence to deliver an opinion is based on Article 29(1)(a) of Regulation (EC) No 1095/2010 (ESMA Regulation). In accordance with Article 44(1) of the ESMA Regulation the Board of Supervisors has adopted this opinion.

ESMA is adopting the following opinion on the notified measure, on the basis of Article 27(2) of Regulation 236/2012 on Short Selling:

On the adverse events or developments

ESMA considers that adverse developments which constitute a serious threat to market confidence in Greece 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 Electronic Secondary Market “HDAT” for government bonds, fragility in the financial system and in the Greek economy still persists due to the situation of the banking sector in Greece. The successful conclusion of the Greek banks’ recapitalisation and the relevant restructuring process is important in order to safeguard the stability of the financial system and of the Greek capital market.

On the appropriateness and proportionality of the proposed measure

ESMA considers that the proposed measure means in practice a partial lifting of the previous ban on short selling, in terms of the instruments covered. ESMA considers that the proposed measure is appropriate and proportionate to address the above mentioned threats that persist in the Greek financial markets. Short sales in the shares of the five Greek credit institutions admitted to trading on the Athens Exchange and comprising the FTSE/Athex Banks Index could still exacerbate the threats to financial stability, especially considering the upcoming recapitalisation of the Greek Banking system. Market volatility might render the recapitalization more difficult and more costly. At the same time, the proposed measure, relating only to Greek credit institutions, is clearly meant to accompany the gradual normalisation of financial conditions in Greece. The exemption foreseen for market making activities is justified by the fact that market makers should be allowed to properly carry out their activity, thus enhancing the liquidity on the above mentioned shares and contributing to the adequate functioning of Greek financial markets.

On the duration of the proposed measure

ESMA considers that the duration of the proposed measure is justified, taking into account
the uncertainty surrounding the ongoing recapitalization and restructuring process of the systemic credit institutions in Greece. Under these circumstances, ESMA considers it is necessary and appropriate for HCMC to impose a short selling ban on the mentioned Greek credit institutions admitted to trading on the Athens Exchange and comprising the FTSE/Athex Banks Index that would last until the 9th of November 2015, with a view to reducing price volatility in the course of this process. Besides, ESMA takes into consideration HCMC’s statement in its notification of intent that the proposed measure may be lifted before the end of the established period should the circumstances allow for it, though not excluding a renewal of the proposed measure in accordance with the provisions of the Regulation, should the recapitalisation and restructuring process not be concluded by its expiry date.

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