AIMA

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Alternative Investment Management Association Representing the global hedge fund industry

Short Selling Bans

Europe

On 1 November 2012, the EU Short Selling Regulation (SSR) entered into effect and provided harmonised European rules in relation to physical naked short selling of EEA shares and EEA sovereign CDS. The SSR, nonetheless, enables ESMA to permit unilateral action by individual Member States to prohibit short sales in exceptional circumstances.

Following submission of a notification, the Greek capital markets regulator (HCMC) was granted permission by ESMA to maintain a prohibition under the SSR on short sales of the shares of credit institutions admitted to trading on the Athens Exchange. The Greek ban, however, was lifted on 15 July 2013.

 

Relevant documents

Greece

HCMC Lifts Prohibition on short selling of the shares of credit institutions admitted to trading on the Athens Exchange (July 2013)

HCMC Prohibition on short selling of the shares of credit institutions admitted to trading on the Athens Exchange (April 2013)

ESMA Opinion on Greek Emergency Measure on Short Selling (April 2013)


Asia-Pacific

South Korea

Article 180 of the South Korean Financial Investment Services and Capital Markets Act, prevents the making of sales of listed securities (i.e.,) where either the person concerned does not own the security or where there is an intention to settle the account by borrowed securities.

Listed securities means:

  • convertible bonds, bonds with warrant, participating bonds or exchangeable bonds;
  • equity securities;
  • beneficiary certificates;
  • derivative-combined securities; or
  • securities depository receipts - limited to those related to securities of a type referred to above.

However, a sale is not regarded as being short when:

  • listed securities for which a purchase contract was made are sold before the settlement date;
  • stocks that will be acquired by exercising a right of convertible bonds, exchangeable bonds, bonds with warrant, etc. are sold and it is possible to settle the account because the stocks will be listed by the settlement date; and
  • there is otherwise no possibility of failing to perform the settlement.

Limited exemptions are permitted under Article 180 “in order to maintain the stability of the securities exchange and form a fair market price” – these are set out in Article 208 of the Enforcement Decree of the Financial Investment Services and Capital Markets Act (referred to within Article 180 as the Presidential Decree).

Key legislative documents

Securities Laws

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      1. AIFMD
      2. European Capital Markets Regulation
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        1. ETFs and Structured UCITS
      5. Venture Capital
    2. US Hedge Fund Adviser Regulations
      1. Registration and Reporting
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      3. JOBS Act
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    5. Regulation of NBFCs / SIFIS
    6. Supervision
      1. UK regulatory reform
      2. European Supervisory Authorities
      3. US Self-Regulatory Organisations
    7. Remuneration
      1. UK
      2. US
      3. CRD IV and CRR
      4. AIFMD
      5. MiFID
    8. Shadow Banking
    9. Volcker Rule
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      1. ESMA Guidelines
      2. MiFID / MiFIR
      3. MAD / MAR
      4. Flash Crash
      5. IOSCO
      6. Germany
      7. CFTC Automated Trading
    4. Insurance Regulation
      1. Solvency II
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      2. Indices as Benchmarks
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      4. Short Selling Bans
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    11. Trading
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  4. Tax Affairs
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    2. FAIFs and FINROFs
    3. FATCA
    4. FIN 48 and IAS 12
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    6. Investment Manager Exemption
    7. UK Offshore Funds Regime
    8. Other
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    1. Guidance Notes
    2. Jurisdictional Guides
    3. Noticeboard
      1. FATCA
      2. Other Hot Asset Management Topics
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      4. UK Partnership Tax Review
      5. Volcker Rule
    4. Hedge Fund Manager Training
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