AIMA

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) has been 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 prohibition applies irrespective of the location of execution and includes sales which are covered with subsequent intraday purchases. The prohibition also applies to all depository receipts (including ADRs and GDRs) representing such shares. Market makers which transact in such shares for hedging purposes linked to their market making activities are exempted from this prohibition. The Greek ban will remain applicable until 31 July 2013.

 

Relevant documents

Greece

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)

 

AIMA documents

Summary of the EU short selling restrictions (August 2011)

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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