Monday September 29 2014

News Source: Global Disclosures

Focus: Major Shareholdings

Type: General

Country: European Union




The European Securities and Markets Authority has published its final report on draft Regulatory Technical Standards on major shareholdings and an indicative list of financial instruments subject to notification requirements under the revised Transparency Directive.

The revised Transparency Directive was published in the Official Journal of the European Union on 6 November 2013 and entered into force on 26 November 2013. The Directive undertakes a revision of the regime for notification of major holdings of voting rights, introducing the rule of aggregation of holdings of shares with holdings of financial instruments and harmonising the calculation of notification thresholds and exemptions from the notification requirements.

The Final Report is as follows:

Draft RTS on a method for calculation of the 5% threshold referred to in the Article 9(5) and (6) exemptions of the TD

  • Trading book/market making exemptions – aggregation will be required on a horizontal (across all types of financial instrument) and vertical (within the group) basis

Draft RTS on a method for calculating the number of voting rights referred to in TD Article 13(1a)(a) in the case of financial instruments referenced to a basket of shares or an index

  • financial instruments referenced to a basket or index will be subject to notification requirements laid down in Article 13(1a)(a) when the relevant securities represent 1% or more of voting rights in the underlying issuer or 20% or more of the value of the securities in the basket/index or both.
  • The 1% should be calculated based on the number of voting rights which an investor holds through financial instruments referenced to a basket of shares or an index, not based on the number of voting rights connected to shares contained in the basket or index as a whole.
  • When an investor holds more than one financial instrument referring to the same basket/index, such instruments have to be accumulated for the purpose of calculating the 1% threshold
  • When a financial instrument is referenced to a series of baskets of shares or indices, the voting rights held through the individual baskets of shares or indices shall not be accumulated for the purpose of the thresholds

Draft RTS on a method for determining delta for the purpose of calculating voting rights referred to in TD Article 13(1a)(b) in the case of financial instruments which provide exclusively for a cash settlement

  • The number of voting rights relating to an exclusively cash settled financial instrument with a linear, symmetric pay-off profile with the underlying share shall be calculated on a delta-adjusted basis with cash position being equal to 1.
  • The number of voting rights relating to an exclusively cash settled financial instrument without a linear, symmetric pay-off profile with the underlying share shall be calculated on a delta-adjusted basis, using generally accepted standard pricing models.

Draft RTS on client-serving transactions as referred to in TD Article 13(4)

  • The exemption referred to in Article 9(6) of Directive 2004/109/EC shall apply to financial instruments held by a natural person or legal entity fulfilling orders received from clients, responding to a client’s request to trade otherwise than on a proprietary basis or hedging positions arising out of such dealings.

Indicative list of financial instruments subject to notification requirements according to TD Article 13(1).

  • List of financial instruments having an “economic effect similar” to that of shares or entitlements to acquire shares.

The following are already included:

  1. transferable securities;
  2. options;
  3. futures;
  4. swaps;
  5. forward rate agreements;
  6. contracts for differences; and
  7. any other contracts or agreements with similar economic effects which may be settled physically or in cash

The following shall be additionally included provided they reference shares to which voting rights are attached:

  1. irrevocable convertible and exchangeable bonds referring to already issued shares;
  2. financial instruments referenced to a basket of shares or an index and which comply with the criteria laid down in Article 4 (1) of Commission Delegated Regulation;
  3. warrants;
  4. repurchase agreements;
  5. rights to recall lent shares;
  6. contractual buying pre-emption rights;
  7. other conditional contracts or agreements than options and futures;
  8. hybrid financial instruments;
  9. combinations of financial instruments;
  10. shareholders’ agreements having Directive 2004/109/EC Article 13(1)(a) and (b) financial instruments as an underlying.

The Final Report will be submitted to the European Commission by 27 November 2014. The Commission has three months to decide whether to endorse ESMA’s draft RTS.

Click on the above link for more details.