LONDON (Reuters) – The European Union’s markets watchdog has recommended a U-turn on disclosing short positions to regulators, saying that a stricter threshold generates far more essential information to aid supervision.
The European Securities and Markets Authority (ESMA) said on Thursday it was recommending to the European Commission to permanently lower the threshold for reporting short positions to 0.1% from 0.2% of a company’s issued share capital.
Short positions are a bet that the price of a company’s stock will fall.
The threshold was temporarily lowered for the first time to 0.1% in March 2020 when markets suffered bouts of extreme volatility as economies entered lockdowns to fight COVID-19.
ESMA had said in March this year it had decided to allow the temporary lowering of the threshold to expire on March 19, saying markets no longer resembled the emergency situation of a year ago.
But on Thursday the watchdog said an analysis showed that a “substantial amount of additional and essential information” became available for market regulators when disclosure was set at 0.1%.
This additional transparency translates into an improved ability for regulators to conduct market oversight, ESMA said. “ESMA therefore considers it essential to lower the reporting threshold to 0.1% on a permanent basis.”
Following Brexit in December last year, Britain announced in January it would cut the 0.2% threshold inherited from the bloc to 0.1%.
(Reporting by Huw Jones; Editing by Kim Coghill)
