ESMA update of SSR Q&A

Published: 06 February 2018

After a two-year wait, the European Securities and Markets Authority (ESMA) has updated its Q&A Document under the EU Short Selling Regulation (SSR) to provide additional clarity on the concept of covered short sales where shares are sold based on subscription and other such rights to those shares.

This has been a significant problem for numerous market participants caught up in the Greek HCMC enforcement issues for the sales of rights issue allocations of certain Greek bank shares listed on the Athens exchange.  

ESMA’s Question and Answer 10.6 has been augmented to confirm that rights to subscribe for new shares cannot be used to cover a short sale where, at the time of entering into the short sale, there is uncertainty as to whether the new shares subscribed for will be available for settlement in due time. The Q&A sets out a non-exhaustive list of examples.

Overall, the provisions are particularly broad and appear to confirm that the reasonable expectation test that settlement can occur when seeking to locate shares does not apply in the case of subscriptions, instead that there must be no uncertainty that settlement can occur.

If members have any questions or comments, please contact Adam Jacobs-Dean, Oliver Robinson or Adele Rentsch.