As the Short Selling Regulation is directly applicable in each Member State, the European Securities and Markets Authority (ESMA) coordinates the interpretation of the regulation. ESMA has published Questions & Answers (Q&A) on more general issues on its website on short selling:
1. Where do I have to report net short positions?
Reporting of net short positions under the Short Selling Regulation must be done via the Danish FSA's officially appointed mechanism (OASM). If you are able to receive a Danish digital signature (NemID) you are obliged to use this. A Danish digital signature normally requires a Danish CVR or CPR number. Otherwise you have to register in order to receive a username and password. Application for a username and password is made via the OASM.
Please see the guide at Reporting of short positions
Registration has to be finished before you can submit the first report of a net short position.
2. In case an issuer has both A- and B-shares, how should I calculate my net short position?
A short net position has to be calculated on the basis of the total issued share capital. This includes the total of both A- and B-shares, regardless of whether only one or both share classes are admitted to trading.
3. How can I find the total issued share capital?
Information regarding an issuer's share capital may be found in several different places. Firstly the share capital can always be found in the company’s articles of association. These can often be found on the issuer's webpage.
You should also be able to find the total share capital in the issuer's annual report; here it will normally be an item under equity. If you read the annual report you also have to check if, after the publication of the annual report, the issuer has issued any company announcements regarding the share capital.
4. Is it possible to submit my net short position in Danish Kroner?
No – a net short position in shares has to be notified in accordance with the Short Selling Regulation. If a net short position is in shares it has to be notified in number of shares and percentages. If you have a net short position in sovereign debt it has to be notified in Euro.
5. What is the primary ISIN code for a financial instrument?
An ISIN is a uniqe identifier for a financial instrument. An issuer may have several ISIN codes since an ISIN is related to the instrument and not the issuer. As regards the notification of net short positions the notification has to be made in respect of the primary ISIN for an issuer. The primary ISIN for each issuer can be found when submitting the notification via the Danish FSA web portal.
6. Do I report a net short position in foreign sovereign debt to the Danish FSA?
No – notification of net short positions in sovereign debt has to be submitted to the relevant competent authority of the issuer of the debt. The ESMA webpage on short selling provides links to relevant competent authorities' webpages. On these pages you should be able to find information regarding reporting of net short positions in each member state.
7. How do I get a username and access code?
Please see the guide at Reporting of short positions
8. Yesterday X fund flagged a short position of 3% of TDC, and today they flag that they no longer hold a short position. However I cannot see that so many shares have been traded. Is this an error?
In general the person notifying is responsible for the positions being reported correctly. Therefore the DFSA cannot comment on whether a specific reporting is correct.
However the DFSA must at the same time emphasise that a net short position should be measured not only by sale of shares, but could arise as part of trading in CFD, as part of index trading or another type of derivative. You can read more about how to measure a short position in Commission Delegated Regulation (EU) No 918/2012 of 5 July 2012.
9.Under reporting of short positions in shares you state:
"Companies or individuals who have a short position in the issued share capital of 0.2% of a company admitted to trading on a regulated market or an MTF are obliged to notify the DFSA of the short position. Subsequently individuals are obliged to notify changes in the short position of 0.1% of the issued share capital until the position falls below 0.2%"
If I notify a short position at 0.23%, should I notify when I pass 0.33% or at 0.3%?
The reporting obligation arises when crossing the threshold of 0.2% and when crossing a threshold of 0.1% of this. This means that the next obligation to notify arises when crossing the threshold of 0.3% and subsequently when crossing thresholds of 0.4%, 0.5% etc. up- or downwards.
As stated above you can find a Q&A on general questions of understanding the regulation at ESMA's website. The same response can be found in questions 2f and 2g which also address rounding off positions.
10. Is it possible to get short selling notifications in a machine-readable format?
On a continuous basis, the Danish FSA provides access to short selling notifications only in the format found at http://oasm.dfsa.dk/uk/searchannouncement.aspx
Occasionally the information is updated in compressed form in this excel file.
11. Can I subscribe to the daily notifications of short positions?
Yes, by creating a subscription on a search. You will find instructions here (pdf).
12. Is the 30-day rule for the market maker’s notification prior to the use of the exemption applicable, cf Article 17 of the regulation, when a new share is admitted to trading?
Yes, generally the use of the market maker exemption under article 17 of the regulation must be notified to the competent authority 30 days prior to the use of the exemption. However in some particular instances (e.g. in connection with initial public offering) the DFSA may give a positive response to the market maker upon request. The exemption may then be used from the date on which the market maker receives confirmation from the DFSA that we do not intend to refuse the use of the exemption on the specific instrument.
This procedure is found in paragraph 17 of ESMA's Guidelines on Exemption for market making activities and primary market operations under Regulation (EU) 236/2012 of the European Parliament and the Council on short selling and certain aspects of Credit Default Swaps (ESMA/2013/74). The DFSA has announced that it will follow the ESMA Guidelines, and therefore this process will be followed.
13. Should the signed notification that the market maker intends to use the exemption be submitted on paper to the DFSA?
The forms can be submitted electronically. In such cases, the signature line must be marked with a unique identification of the person who signed the notification. Further, the submission must include a clear identification of who have submitted the forms. The DFSA also points out that the document with the financial instruments covered (Annex III) must be submitted electronically in CSV format.
14. Should we send a copy of a new market maker agreement with the issuer when we make changes in the agreement such as adjustment of the agreed fee?
It is only necessary to send notice or copy of a renewed agreement if key tasks or activities within the market maker agreement are to be changed. If there is a formal market maker agreement ("contract"), the message announcing the intention of using the exemption should contain either a description of the main tasks and activities in accordance with the contract or a copy of the new contract. The description of the main tasks and activities should be written in block 3 (e) of the notification form (Annex II). This description should specify whether the agreement regulates for how much of the daily trading period the market maker is committed to quote prices.
15. Where and how should the notification of intentions to use the exemption specify the anticipated extent of market making activities with a financial instrument?
According to section 65.xii. the anticipated extent of the market maker activity should be stated. The DFSA recommends using block 3 (c) of the notification form (Annex II) when notifying this. Alternatively you may insert an additional column in the spreadsheet (Annex III), so that the extent is noted for each of the ISIN codes in question. The extent could be entered as a range rather than as an exact value. It is not sufficient merely to indicate that you are ready to trade. The DFSA expects that the market maker has considered the expected activity in each instrument and whether it may have internal limits for quoting prices of each instrument. These considerations should be made prior to submitting the notification form to the DFSA.
16. Should we submit an updated message if we have already stated that we are a market maker in all shares included in an index (e.g. OMX C20 Cap) and there is a change in the shares included in the index?
Yes. The guidelines state that a list of instruments, such as an index at a given date, could be included in the notification if the list allows the competent authority to identify the instruments in question. A submitted notification only includes the instruments which were part of the index at the exact time when the notification was sent. A subsequent change in the shares included in the index therefore requires a new notification. The same principle applies to notifications regarding an index such as NASDAQ OMX Copenhagen Large Cap companies. Any subsequent change in the Large Cap index requires that the DFSA receives a new notification of intent to use the exemption for this particular instrument.
17. Should we submit two notifications about the intent to use the exemption when for the same instrument we perform market making activities in accordance with its definition in Article 2(1)(k)(i) and 2(1)(k)(ii)?
It is sufficient with one notification; however the notification must describe the activities carried out pursuant to Article 2 (i)(k). If several activities are carried out this must be notified.
18. Why does it say (Historic) on some notifications of short positions?
Notification of a net short position is marked “(Historic)” when a position holder has made a new notification in the same share. Furthermore, notification of a net short position being reduced below 0.5% will be marked “(Historic)” after 24 hours.