Germany’s financial regulator, BaFin, has introduced a new short position disclosure regime following recommendations from the Committee of European Securities Regulators (CESR).
Financial institutions in Germany will have to disclose net short positions to BaFin by the end of the next trading day if they reach or exceed or fall below 0.2% of the outstanding share capital of 10 financial companies.
If short positions in the selected financial stocks reach, exceed of fall 0.5%, BaFin will make the positions public but without disclosing the identity of the holder.
Further disclosures must be made each time the holding exceeds either of the two thresholds by a further 0.1%. The new disclosure regime will start on 25 March and be in place until 31 January 2011. Market makers will be exempt from the requirements.
The companies included comprise: Aareal Banks; Allianz; Generali Deutschland Holding; Commerzbank; Deutsche Bank; Deutsche Börse; Deutsche Postbank; Hannover Re; MLP and Munich Re.
BaFin will publish the net short positions of firms in an anonymous form the day after it has received the information from financial institutions.
The requirements are in line with recommendations made earlier this week by CESR, the body responsible for supervisory convergence in Europe.
In a statement, BaFin noted that while the financial markets had stabilised to the point where prohibition of uncovered short-selling transactions in the specified stocks is currently not required, there is still a risk of market deterioration, which could be exacerbated by short-selling.
“Such publication and notification requirement is appropriate to… preserve and strengthen the trust of market participants in the effective functioning of the financial market,” read the BaFin statement. “The introduction of these obligations will result in a better information basis allowing BaFin to perform targeted monitoring of the market with respect to short selling transactions and, to the extent necessary, to intervene sufficiently in advance and swiftly in order to counter undesirable developments.”