A Commission Delegated Regulation, published in the Official Journal of the European Union, amends the EU Short Selling Regulation to make permanent the lower notification threshold for notifying national regulators of net short positions held in the shares of companies traded on EU regulated markets. The threshold for notification will be 0.1% of the issued share capital of the company in question and each 0.1% above that. The lower threshold will apply from January 31, 2022.

Previously, notifications were not required until short positions of 0.2% were held, and then each 0.1% thereafter. However, due to market turmoil arising from the pandemic, the European Securities and Markets Authority introduced the lower threshold of 0.1% on a temporary basis in March 2020. The European Commission considers it appropriate to make the threshold permanent, in light of ongoing instability in markets and the need to avoid uncertainty in regulatory reporting.
Like the temporary threshold, the permanent threshold will not apply to:

• shares admitted to trading on a regulated market where the principal venue for the trading of the shares is located in a third country;
• transactions performed due to market making activities; and
• a net short position in relation to the carrying out of stabilization under the EU Market Abuse Regulation.

ESMA consulted last year on proposed revisions to the Short Selling Regulation arising from reactions to the impact of the COVID-19 pandemic and the related regulatory response where numerous and varied short sale bans were imposed by various EU member states as well as the market turmoil in the U.S. markets and elsewhere for so-called meme stocks, such as those of GameStop. ESMA is expected to make its recommendations to the Commission in Q1 2022.

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