FAQ ON SHORT SELLING
Updated version of 30 November 2009 with regard to resolution 17078 of 26 November 2009
1. In what circumstances does the ban on short selling apply?
The ban applies to short selling on Italian regulated markets. The ban does not apply to short selling outside the Italian regulated markets.
2. To which financial instruments does the ban on short selling apply?
The ban applies to short selling on shares listed on Italian regulated markets with regard to companies resolving a capital increase resolved by November 30, 2009.
The ban does not apply to the sale of exchange-traded funds, option rights or other financial instruments.
3. Which regime applies for the trading of derivatives?
The ban on short selling does not apply to the trading of derivatives (e.g. the sale of call options or futures, or purchase of put options), either on or outside regulated markets.
In any event the Resolution contains a provision according to which the management company, pursuant to art. 70, Italian Legislative Decree no. 58 of 24 February 1998, adopts "all measures necessary to prevent speculative practices that could result in an abnormal reduction in the prices of shares". This provision mainly refers to the trading of derivatives.
4. What is meant by "short selling"?
"Short selling" is a sale not backed by the "right to receive" the securities involved in the sale by the settlement date. The "right to receive" securities can be acquired by one of the following methods (NB. the list might not be complete):
-
Subject to receipt of confirmation of the execution of a purchase order, even if executed off-market;
-
By exercise of the recall option (from the borrower) of securities previously lent, provided the recall (from the borrower) is performed on the same trading day;
-
Subject to the exercise of stock options;
-
Subject to exercise of the right to convert convertible bonds into shares;
-
Subject to a request for delivery of the underlying shares, by the holder of an American Depositary Receipt of similar share certificate.
On the contrary, the "right to receive" the securities cannot be acquired subject to the stipulation of a securities lending contract, neither subject to the exercise of the option right.
In order not to be classed as short selling, it is important to remember that the above-mentioned methods confer the "right to receive" the securities by the settlement date of the sale.
5. Which is the period of the application of the ban?
The ban applies up and until the closing date of the capital increase(1).
The ban applies from the day after that on which the transaction is approved by the board of directors or management board.
For the purpose of the previous point, the relevant meeting of the board of directors or management board is that which approved: (i) the proposal to the shareholders’ meeting to increase share capital; (ii) the request to exercise delegated powers, pursuant to article 2443 of the Italian Civil code, only with regard to transactions fully defined in terms of development and timing and
therefore for which, at the time of their approval, it is reasonably certain that the board of directors or management board will actually exercise the delegated powers.
Otherwise, with regard to share capital increase transactions pursuant to article 2443 of the Italian Civil Code for which there is no certainty of whether or when the delegated power will be exercised, the board of directors or management board meeting taken into consideration is that in which it was resolved to increase share capital in implementation of delegated powers attributed to the
directors by the Articles of Association.
The date of approval of the share capital increase transaction is considered to be that on which the board of directors or management board meeting began, even if the meeting ends after midnight.
The following share capital increase transactions are not subject to the ban:
a) those not involving a flow in money terms, e.g. share capital increases involving contributions in kind or on loan, pursuant to article 2440 of the Italian Civil code, or share capital increases reserved to payment plans to company members, employees or collaborators pursuant to article 114-bis, subsection 1 of Italian Legislative Decree no. 58 of 24 February 1998, as amended;
b) those underlying an issue of warrants or convertible bonds.
6. Are there any special cases not classed as short selling?
The list that follows might not be complete.
a) Obligation to deliver the underlying shares – by the seller of a call option – is not a consequence of a sale, but rather depends on the exercise of the option intrinsic to the contract by the call buyer. Such circumstances (sale of call options) would therefore not be classed as short selling.
b) The same reasoning applies, mutatis mutandis, to the purchase of put options and the trading of derivatives resulting in an obligation or right to deliver the underlying shares.
c) The sale of underlying securities executed in implementation of delta hedging strategies in relation to derivative risks is not classed as short selling, with regard to contracts stipulated prior to the entry into force of the ban, for all shares envisaged under point 2.
7. Is any disclosure regime envisaged?
The Resolution envisages a ban on short selling on Italian regulated markets of shares listed on Italian regulated markets, in accordance with the terms described above.
No disclosure regime is envisaged (to the market or to the Authority) for short selling.
8. Can market makers, specialists and liquidity providers perform short sales?
The Resolution explicitly envisages that the ban does not apply to market maker activities, only with regard to those implemented in order to perform regular business activities. It should also be pointed out that the role of market maker does not correspond to that described in article 1, subsection 5-quater of Italian Legislative Decree no. 58 of 24 February 1998, with regard to
its restriction on regulated markets and multilateral trading facilities.
The concept of market maker, therefore, solely for the purposes of the ban on short selling, is not limited to the activities performed on regulated markets and multilateral trading facilities, but also concerns "off-market" transactions.
Similarly, the ban does not apply to specialists, as defined in the Regulation on Markets organised and managed by Borsa Italiana S.p.A., and to intermediaries operating in execution of a liquidity contract (i.e. liquidity providers), provided the action is implemented as part of their normal duties on regulated markets.
9. Are there any restrictions on security lending?
No. No ban is envisaged on the lending of shares listed on Italian regulated markets.
10. Is the recall of lent securities compulsory?
As already mentioned, exercise of the right of recall on previously lent securities, by the end of the trading day, allows the sale of the securities. In general, however, there is no obligation to recall lent securities.
Securities subject to the ban on short selling
Since 11 August 2010, no securities are subject to the ban on short selling anymore.
[ faq list ]
_______________
Footnote:
1. In the case of share capital increases with option rights, excluding the offering period on regulated markets pursuant to article 2441, subsection 3 of the Italian Civil Code.
Updated version of 31 July 2009 with regard to resolution 16971 of 28 July 2009
1. In what circumstances does the ban on short selling apply?
The ban applies to short selling on Italian regulated markets. The ban does not apply to short selling outside the Italian regulated markets.
2. To which financial instruments does the ban on short selling apply?
The ban applies to short selling on shares listed on Italian regulated markets with regard to companies resolving a capital increase.
The ban does not apply to the sale of exchange-traded funds, option rights or other financial instruments.
3. Which regime applies for the trading of derivatives?
The ban on short selling does not apply to the trading of derivatives (e.g. the sale of call options or futures, or purchase of put options), either on or outside regulated markets.
In any event the Resolution contains a provision according to which the management company, pursuant to art. 70, Italian Legislative Decree no. 58 of 24 February 1998, adopts "all measures necessary to prevent speculative practices that could result in an abnormal reduction in the prices of shares". This provision mainly refers to the trading of derivatives.
4. What is meant by "short selling"?
"Short selling" is a sale not backed by the "right to receive" the securities involved in the sale by the settlement date. The "right to receive" securities can be acquired by one of the following methods (NB. the list might not be complete):
-
Subject to receipt of confirmation of the execution of a purchase order, even if executed off-market;
-
By exercise of the recall option (from the borrower) of securities previously lent, provided the recall (from the borrower) is performed on the same trading day;
-
Subject to the exercise of stock options;
-
Subject to exercise of the right to convert convertible bonds into shares;
-
Subject to a request for delivery of the underlying shares, by the holder of an American Depositary Receipt of similar share certificate.
Except for share in companies subject to share capital increases, for which transitional regime indicated under point 5 applies, On the contrary, the "right to receive" the securities can not also be acquired subject to the stipulation of a securities lending contract.
In this case, the individual securities lending transactions can be executed prior to or at the same time as issue of the sale order. For this purpose it is sufficient that the lender confirms availability of the securities and that they are available only to the borrower.
In order not to be classed as short selling, it is important to remember that the above-mentioned methods confer the "right to receive" the securities by the settlement date of the sale.
As regards share capital increases in particular shares resulting from capital increases, considering that the issuer commits to delivering the resulting shares them within a specific number of days (usually ten) from the "closing of the transaction", all the sales prior to
delivery by the issuer shall be considered short selling, except for sales with settlement date starting from the last day of delivery contractually agreed.
By way of example, if the delivery period for the resulting shares is within ten trading days, short selling rules apply to all sales completed from before delivery by the issuer until the sixth day after "closing of the transaction". However, regardless of the date of delivery by the issuer, short selling rules do not apply to sales
completed as from the seventh day after "closing of the transaction".
5. Which is the period of the application of the ban?
The text of this answer is valid until 31 May 2009.
With regard to shares in companies subject to share capital increases, the strictest regime for The ban applies from the day after that on which the transaction is approved by the board of directors or management board.
For the purpose of the previous point, the relevant meeting of the board of directors or management board is that which approved: (i) the proposal to the shareholders’ meeting to increase share capital; (ii) the request to exercise delegated powers, pursuant to article 2443 of the Italian Civil code, only with regard to transactions fully defined in terms of development and timing and
therefore for which, at the time of their approval, it is reasonably certain that the board of directors or management board will actually exercise the delegated powers.
Otherwise, with regard to share capital increase transactions pursuant to article 2443 of the Italian Civil Code for which there is no certainty of whether or when the delegated power will be exercised, the board of directors or management board meeting taken into consideration is that in which it was resolved to increase share capital in implementation of delegated powers attributed to the
directors by the Articles of Association.
Consequently, as of 17 March 2009, the share capital increases approved by the boards of ENEL S.p.A. and SNAM RETE GAS S.p.A. on 11 March 2009 and 12 February 2009, respectively, are subject to the strictest regime for the ban on short selling.
For the application of the strictest regime for the ban, The date of approval of the share capital increase transaction is considered to be that on which the board of directors or management board meeting began, even if the meeting ends after midnight.
The strictest regime for the ban applies up to the closing date of the share capital increase.
The following share capital increase transactions are not subject to the strictest regime for the ban:
a) those not involving a flow in money terms, e.g. share capital increases involving contributions in kind or on loan, pursuant to article 2440 of the Italian Civil code, or share capital increases reserved to payment plans to company members, employees or collaborators pursuant to article 114-bis, subsection 1 of Italian Legislative Decree no. 58 of 24 February 1998, as amended;
b) those underlying an issue of warrants or convertible bonds.
Given the objective difficulty in considering ex ante all potential scenarios subject to application of the strictest regime for the ban and, specifically, with regard to share capital increases transactions pursuant to article 2443 of the Italian Civil Code, the difficulty in reliably identifying transactions that meet the requisites of
point (ii) above, it is important that the listed companies contact the appropriate Consob office prior to the board of directors or management board meeting to approve the proposal to the shareholders’ meeting or the request to exercise delegated powers pursuant to article 2443 of the Italian Civil Code.
This in order to guarantee adequate disclosure of the applicable regime at the same time as issue of the press release on approval of the transaction by the board of directors or management board.
* * *
Point 6 of Resolution no. 16904 of 27 May 2009 introduced a transitional regime based on which each share capital increase on which, from 1 June 2009, the strictest short selling regime applies, pursuant to point 2 of Resolution no. 16813 of 26 February 2009, and continues to be subject to this stricter regime until the "closing of the transaction"
(in the case of share capital increases with option rights, excluding the offering period on regulated markets pursuant to article 2441, subsection 3 of the Italian Civil Code).
The list of companies subject to the ban is attached. The ban applies to transactions approved from 1 March to 30 November 2009, up and until the day of the closing of the transaction, even when this one shall end after 30 November 2009 (see the attached list).
6. Are there any special cases not classed as short selling?
The list that follows might not be complete.
a) Obligation to deliver the underlying shares – by the seller of a call option – is not a consequence of a sale, but rather depends on the exercise of the option intrinsic to the contract by the call buyer. Such circumstances (sale of call options) would therefore not be classed as short selling.
b) The same reasoning applies, mutatis mutandis, to the purchase of put options and the trading of derivatives resulting in an obligation or right to deliver the underlying shares.
c) The sale of underlying securities executed in implementation of delta hedging strategies in relation to derivative risks, with regard to contracts stipulated prior to the entry into force of Resolution no. 16645 – i.e. before 13:59 hours on 1 October 2008 – or prior to the entry into force of Resolution no. 16652 – i.e. before 13:59 hours on 10 October 2008 (for shares
of banks or insurance companies listed on Italian regulated markets and for all other shares subject to the ban pursuant to paragraph 2 of the Resolution, respectively).
In this case, it is emphasised that the above-mentioned short sales must be backed by securities lending transactions from the time of transmission of the sale order.
If not, except in the case envisaged under point 8 below, the sale of underlying securities as hedging of derivative positions, in relation to contracts stipulated after the entry into force of Resolution no. 16645 or Resolution no. 16652 (for shares of banks and insurance companies listed on Italian regulated markets and all other shares subject to the ban pursuant to point 2 of the
Resolution, respectively) is classed as short selling.
d) The exemptions indicated in point c) above also apply to sales of underlying securities as part of delta hedging strategies on short derivative positions, as a result of the termination of contracts stipulated prior to the entry into force of Resolution no. 16645 or Resolution no. 16652 (for shares of banks and insurance companies listed on Italian regulated markets and all other shares
subject to the ban pursuant to point 2 of the Resolution, respectively) is classed as short selling.
e) The exemptions indicated in point c) and in point d) above also apply to positions existing on 31 July 2009, with regard to shares in companies subject to share capital increases approved from 1 June to 31 July 2009, on the day prior to that from which the
strictest regime for the ban applies as described under paragraph 5 above.
7. Is any disclosure regime envisaged?
The Resolution envisages a ban on short selling on Italian regulated markets of shares listed on Italian regulated markets, in accordance with the terms described above.
No disclosure regime is envisaged (to the market or to the Authority) for short selling.
8. Can market makers, specialists and liquidity providers perform short sales?
The Resolution explicitly envisages that the ban does not apply to market maker activities, only with regard to those implemented in order to perform regular business activities. It should also be pointed out that the role of market maker does not correspond to that described in article 1, subsection 5-quater of Italian Legislative Decree no. 58 of 24 February 1998, with regard to
its restriction on regulated markets and multilateral trading facilities.
The concept of market maker, therefore, solely for the purposes of the ban on short selling, is not limited to the activities performed on regulated markets and multilateral trading facilities, but also concerns "off-market" transactions.
Similarly, the ban does not apply to specialists, as defined in the Regulation on Markets organised and managed by Borsa Italiana S.p.A., and to intermediaries operating in execution of a liquidity contract (i.e. liquidity providers), provided the action is implemented as part of their normal duties on regulated markets.
9. Are there any restrictions on security lending?
No. No ban is envisaged on the lending of shares listed on Italian regulated markets.
10. Is the recall of lent securities compulsory?
As already mentioned, exercise of the right of recall on previously lent securities, by the end of the trading day, allows the sale of the securities. In general, however, there is no obligation to recall lent securities.
Securities subject to the ban on short selling
(updated version of 30 November 2009)
|
ISIN code
|
Company*
|
|
IT0000226503
|
BANCA ITALEASE S.p.A.
|
|
IT0001276408
|
CLASS EDITORI S.p.A.
|
|
IT0003918635
|
EUROFLY S.p.A.
|
|
IT0001054904
|
GIOVANNI CRESPI S.p.A.
|
|
IT0003081475
|
I VIAGGI DEL VENTAGLIO S.p.A.
|
|
IT0004103294
|
OMNIA NETWORK S.p.A.
|
|
IT0001280947
|
RICHARD GINORI 1735 S.p.A.
|
|
IT0003430813
|
SAFILO GROUP S.p.A.
|
|
IT0000064854
|
UNICREDIT S.p.A.
|
|
IT0000064839
|
UNICREDIT RISP
|
* LOTTOMATICA S.p.A. - This company's shares are not subject to the ban envisaged by resolution 16971 of 28 July 2009 upon request of the company itself, pursuing to resolution 17034 ofl 14 October 2009.
Updated version of 4 June 2009 with regard to resolution 16904 of 27 May 2009
1. In what circumstances does the ban on short selling apply?
The ban applies to short selling on Italian regulated markets. The ban does not apply to short selling outside the Italian regulated markets.
2. To which financial instruments does the ban on short selling apply?
The ban applies to short selling on shares listed on Italian regulated markets. However, the Resolution envisages a separate and stricter regime for shares issued by banks and insurance companies or their related holdings (as per the Annex to the Resolution) and for shares in companies subject to share capital increases.
The ban does not apply to the sale of exchange-traded funds, option rights or other financial instruments.
3. Which regime applies for the trading of derivatives?
The ban on short selling does not apply to the trading of derivatives (e.g. the sale of call options or futures, or purchase of put options), either on or outside regulated markets.
In any event the Resolution contains a provision according to which the management company, pursuant to art. 70, Italian Legislative Decree no. 58 of 24 February 1998, adopts "all measures necessary to prevent speculative practices that could result in an abnormal reduction in the prices of shares". This provision mainly refers to the trading of derivatives.
4. What is meant by "short selling"?
"Short selling" is a sale not backed by the "right to receive" the securities involved in the sale by the settlement date. The "right to receive" securities can be acquired by one of the following methods (NB. the list might not be complete):
-
Subject to receipt of confirmation of the execution of a purchase order, even if executed off-market;
-
By exercise of the recall option (from the borrower) of securities previously lent, provided the recall (from the borrower) is performed on the same trading day;
-
Subject to the exercise of stock options;
-
Subject to exercise of the right to convert convertible bonds into shares;
-
Subject to a request for delivery of the underlying shares, by the holder of an American Depositary Receipt of similar share certificate.
Only with regard to shares listed on Italian regulated markets, not issued by banks, insurance companies or their related holdings or by companies subject to share capital increases; Except for share in companies subject to share capital increases, for which transitional regime indicated under point 5 applies, the "right to receive"
the securities can also be acquired subject to the stipulation of a securities lending contract. In this case, the individual securities lending transactions can be executed prior to or at the same time as issue of the sale order. For this purpose it is sufficient that the lender confirms availability of the securities and that they are available only to the borrower.
In contrast, a sale of shares issued by banks, insurance companies, their related holdings or shares in a company subject to share capital increases backed by borrowed securities, even if the terms specified in the previous paragraph are met, is considered to be a short sale.
In order not to be classed as short selling, it is important to remember that the above-mentioned methods confer the "right to receive" the securities by the settlement date of the sale.
As regards share capital increases, considering that the issuer commits to delivering the resulting shares within a specific number of days (usually ten) from the "closing of the transaction", the following types of sales shall be considered short selling:
a) sales performed on or before the closing date of the transaction.
b) - sales prior to delivery by the issuer, except for sales with settlement date prior to starting from the last day of delivery contractually agreed;
By way of example, if the delivery period for the resulting shares is within ten trading days, short selling rules apply to all sales completed from before delivery by the issuer until the sixth day after "closing of the transaction". However, regardless of the date of delivery by the issuer, short selling rules do not apply to sales completed as from the
seventh day after "closing of the transaction".
5. When and in what circumstances does the strictest regime for the ban on short selling apply to shares in companies subject to share capital increases?
The text of this answer is valid until 31 May 2009.
With regard to shares in companies subject to share capital increases, the strictest regime for the ban applies from the day after that on which the transaction is approved by the board of directors or management board.
For the purpose of the previous point, the relevant meeting of the board of directors or management board is that which approved: (i) the proposal to the shareholders’ meeting to increase share capital; (ii) the request to exercise delegated powers, pursuant to article 2443 of the Italian Civil code, only with regard to transactions fully defined in terms of development and timing and
therefore for which, at the time of their approval, it is reasonably certain that the board of directors or management board will actually exercise the delegated powers.
Otherwise, with regard to share capital increase transactions pursuant to article 2443 of the Italian Civil Code for which there is no certainty of whether or when the delegated power will be exercised, the board of directors or management board meeting taken into consideration is that in which it was resolved to increase share capital in implementation of delegated powers attributed to the
directors by the Articles of Association.
Consequently, as of 17 March 2009, the share capital increases approved by the boards of ENEL S.p.A. and SNAM RETE GAS S.p.A. on 11 March 2009 and 12 February 2009, respectively, are subject to the strictest regime for the ban on short selling.
For the application of the strictest regime for the ban, the date of approval of the share capital increase transaction is considered to be that on which the board of directors or management board meeting began, even if the meeting ends after midnight.
The strictest regime for the ban applies up to the closing date of the share capital increase.(1)
The following share capital increase transactions are not subject to the strictest regime for the ban:
a) those not involving a flow in money terms, e.g. share capital increases involving contributions in kind or on loan, pursuant to article 2440 of the Italian Civil code, or share capital increases reserved to payment plans to company members, employees or collaborators pursuant to article 114-bis, subsection 1 of Italian Legislative Decree no. 58 of 24 February 1998, as amended;
b) those underlying an issue of warrants or convertible bonds.
Given the objective difficulty in considering ex ante all potential scenarios subject to application of the strictest regime for the ban and, specifically, with regard to share capital increases transactions pursuant to article 2443 of the Italian Civil Code, the difficulty in reliably identifying transactions that meet the requisites of point (ii) above, it is important that the
listed companies contact the appropriate Consob office prior to the board of directors or management board meeting to approve the proposal to the shareholders’ meeting or the request to exercise delegated powers pursuant to article 2443 of the Italian Civil Code.
This in order to guarantee adequate disclosure of the applicable regime at the same time as issue of the press release on approval of the transaction by the board of directors or management board.
* * *
Point 6 of Resolution no. 16904 of 27 May 2009 introduced a transitional regime based on which each share capital increase on which, from 1 June 2009, the strictest short selling regime applies, pursuant to point 2 of Resolution no. 16813 of 26 February 2009, and continues to be subject to this stricter regime until the "closing of the transaction" (in the
case of share capital increases with option rights, excluding the offering period on regulated markets pursuant to article 2441, subsection 3 of the Italian Civil Code).
The list of companies subject to the stricter regime is attached.
6. Are there any special cases not classed as short selling?
The list that follows might not be complete.
a) Obligation to deliver the underlying shares – by the seller of a call option – is not a consequence of a sale, but rather depends on the exercise of the option intrinsic to the contract by the call buyer. Such circumstances (sale of call options) would therefore not be classed as short selling.
b) The same reasoning applies, mutatis mutandis, to the purchase of put options and the trading of derivatives resulting in an obligation or right to deliver the underlying shares.
c) The sale of underlying securities executed in implementation of delta hedging strategies in relation to derivative risks, with regard to contracts stipulated prior to the entry into force of Resolution no. 16645 – i.e. before 13:59 hours on 1 October 2008 – or prior to the entry into force of Resolution no. 16652 – i.e. before 13:59 hours on 10 October 2008 (for shares
of banks or insurance companies listed on Italian regulated markets and for all other shares subject to the ban pursuant to paragraph 2 of the Resolution, respectively).
In this case, it is emphasised that the above-mentioned short sales must be backed by securities lending transactions from the time of transmission of the sale order.
If not, except in the case envisaged under point 8 below, the sale of underlying securities as hedging of derivative positions, in relation to contracts stipulated after the entry into force of Resolution no. 16645 or Resolution no. 16652 (for shares of banks and insurance companies listed on Italian regulated markets and all other shares subject to the ban pursuant to point 2 of the
Resolution, respectively) is classed as short selling.
d) The exemptions indicated in point c) above also apply to sales of underlying securities as part of delta hedging strategies on short derivative positions, as a result of the termination of contracts stipulated prior to the entry into force of Resolution no. 16645 or Resolution no. 16652 (for shares of banks and insurance companies listed on Italian regulated markets and all other shares
subject to the ban pursuant to point 2 of the Resolution, respectively) is classed as short selling.
e) The exemptions indicated in point c) above also apply to existing positions, with regard to shares in companies subject to share capital increases, on the day prior to that from which the strictest regime for the ban applies as described under paragraph 5 above.
7. Is any disclosure regime envisaged?
The Resolution envisages a ban on short selling on Italian regulated markets of shares listed on Italian regulated markets, in accordance with the terms described above.
No disclosure regime is envisaged (to the market or to the Authority) for short selling.
8. Can market makers, specialists and liquidity providers perform short sales?
The Resolution explicitly envisages that the ban does not apply to market maker activities, only with regard to those implemented in order to perform regular business activities. It should also be pointed out that the role of market maker does not correspond to that described in article 1, subsection 5-quater of Italian Legislative Decree no. 58 of 24 February 1998, with regard to
its restriction on regulated markets and multilateral trading facilities.
The concept of market maker, therefore, solely for the purposes of the ban on short selling, is not limited to the activities performed on regulated markets and multilateral trading facilities, but also concerns "off-market" transactions.
Similarly, the ban does not apply to specialists, as defined in the Regulation on Markets organised and managed by Borsa Italiana S.p.A., and to intermediaries operating in execution of a liquidity contract (i.e. liquidity providers), provided the action is implemented as part of their normal duties on regulated markets.
9. Are there any restrictions on security lending?
No. No ban is envisaged on the lending of shares listed on Italian regulated markets.
10. Is the recall of lent securities compulsory?
As already mentioned, exercise of the right of recall on previously lent securities, by the end of the trading day, allows the sale of the securities. In general, however, there is no obligation to recall lent securities.
__________________________
Footnote:
1. For share capital increases with option rights, excluding the offering period on regulated markets pursuant to article 2441, subsection 3 of the Italian Civil Code.
Securities subject to the transitional regime for short selling
|
ISIN Code
|
Company
|
|
IT0000074028
|
AEDES S.p.A.
|
|
IT0001479523
|
B.E.E. TEAM S.p.A. (formerly DATASERVICE S.p.A.)
|
|
IT0001007209
|
BANCA POPOLARE DI SPOLETO S.p.A.
|
|
IT0003128367
|
ENEL S.p.A.
|
|
IT0003081475
|
I VIAGGI DEL VENTAGLIO S.p.A.
|
|
IT0003056386
|
PININFARINA S.p.A.
|
|
IT0003270615
|
PIRELLI & C REAL ESTATE S.p.A.
|
|
IT0001453924
|
TISCALI S.p.A.
|
|
IT0004375389
|
UNI LAND S.p.A.
|
Updated version of 14 April 2009 with regard to resolutions 16781 of 29 January 2009 and 16813 of 26 February 2009
1. In what circumstances does the ban on short selling apply?
The ban applies to short selling on Italian regulated markets. The ban does not apply to short selling outside the Italian regulated markets.
2. To which financial instruments does the ban on short selling apply?
The ban applies to short selling on shares listed on Italian regulated markets. However, the Resolution envisages a separate and stricter regime for shares issued by banks and insurance companies or their related holdings (as per the Annex to the Resolution, and for shares in companies subject to share capital increases.
The ban does not apply to the sale of exchange-traded funds, option rights or other financial instruments.
3. Which regime applies for the trading of derivatives?
The ban on short selling does not apply to the trading of derivatives (e.g. the sale of call options or futures, or purchase of put options), either on or outside regulated markets.
In any event the Resolution contains a provision according to which the management company, pursuant to art. 70, Italian Legislative Decree no. 58 of 24 February 1998, adopts "all measures necessary to prevent speculative practices that could result in an abnormal reduction in the prices of shares". This provision mainly refers to the trading of derivatives.
4. What is meant by "short selling"?
"Short selling" is a sale not backed by the "right to receive" the securities involved in the sale by the settlement date. The "right to receive" securities can be acquired by one of the following methods (NB. the list might not be complete):
-
Subject to receipt of confirmation of the execution of a purchase order, even if executed off-market;
-
By exercise of the recall option (from the borrower) of securities previously lent, provided the recall (from the borrower) is performed on the same trading day;
-
Subject to the exercise of stock options;
-
Subject to exercise of the right to convert convertible bonds into shares;
-
Subject to a request for delivery of the underlying shares, by the holder of an American Depositary Receipt of similar share certificate.
Only with regard to shares listed on Italian regulated markets, not issued by banks, insurance companies or their related holdings or by companies subject to share capital increases, the "right to receive" the securities can also be acquired subject to the stipulation of a securities lending contract. In this case, the individual securities lending transactions can be
executed prior to or at the same time as issue of the sale order. For this purpose it is sufficient that the lender confirms availability of the securities and that they are available only to the borrower.
In contrast, a sale of shares issued by banks, insurance companies, their related holdings or shares in a company subject to share capital increases backed by borrowed securities, even if the terms specified in the previous paragraph are met, is considered to be a short sale.
In order not to be classed as short selling, it is important to remember that the above-mentioned methods confer the "right to receive" the securities by the settlement date of the sale.
As regards share capital increases, considering that the issuer commits to delivering the resulting shares within a specific number of days (usually ten) from the closing of the transaction, the following types of sales shall be considered short selling:
a) sales prior to delivery by the issuer, with settlement date prior to the last day of delivery contractually agreed;
b) sales performed on or before the closing date of the transaction.
5. When and in what circumstances does the strictest regime for the ban on short selling apply to shares in companies subject to share capital increases?
With regard to shares in companies subject to share capital increases, the strictest regime for the ban applies from the day after that on which the transaction is approved by the board of directors or management board.
For the purpose of the previous point, the relevant meeting of the board of directors or management board is that which approved: (i) the proposal to the shareholders’ meeting to increase share capital; (ii) the request to exercise delegated powers, pursuant to article 2443 of the Italian Civil code, only with regard to transactions fully defined in terms of development and timing and
therefore for which, at the time of their approval, it is reasonably certain that the board of directors or management board will actually exercise the delegated powers.
Otherwise, with regard to share capital increase transactions pursuant to article 2443 of the Italian Civil Code for which there is no certainty of whether or when the delegated power will be exercised, the board of directors or management board meeting taken into consideration is that in which it was resolved to increase share capital in implementation of delegated powers attributed to the
directors by the Articles of Association.
Consequently, as of 17 March 2009, the share capital increases approved by the boards of ENEL S.p.A. and SNAM RETE GAS S.p.A. on 11 March 2009 and 12 February 2009, respectively, are subject to the strictest regime for the ban on short selling.
For the application of the strictest regime for the ban, the date of approval of the share capital increase transaction is considered to be that on which the board of directors or management board meeting began, even if the meeting ends after midnight.
The strictest regime for the ban applies up to the closing date of the share capital increase.
The following share capital increase transactions are not subject to the strictest regime for the ban:
a) those not involving a flow in money terms, e.g. share capital increases involving contributions in kind or on loan, pursuant to article 2440 of the Italian Civil code, or share capital increases reserved to payment plans to company members, employees or collaborators pursuant to article 114-bis, subsection 1 of Italian Legislative Decree no. 58 of 24 February 1998, as amended;
b) those underlying an issue of warrants or convertible bonds.
Given the objective difficulty in considering ex ante all potential scenarios subject to application of the strictest regime for the ban and, specifically, with regard to share capital increases transactions pursuant to article 2443 of the Italian Civil Code, the difficulty in reliably identifying transactions that meet the requisites of point (ii) above, it is important that the
listed companies contact the appropriate Consob office prior to the board of directors or management board meeting to approve the proposal to the shareholders’ meeting or the request to exercise delegated powers pursuant to article 2443 of the Italian Civil Code.
This in order to guarantee adequate disclosure of the applicable regime at the same time as issue of the press release on approval of the transaction by the board of directors or management board.
6. Are there any special cases not classed as short selling?
The list that follows might not be complete.
a) Obligation to deliver the underlying shares – by the seller of a call option – is not a consequence of a sale, but rather depends on the exercise of the option intrinsic to the contract by the call buyer. Such circumstances (sale of call options) would therefore not be classed as short selling.
b) The same reasoning applies, mutatis mutandis, to the purchase of put options and the trading of derivatives resulting in an obligation or right to deliver the underlying shares.
c) The sale of underlying securities executed in implementation of delta hedging strategies in relation to derivative risks, with regard to contracts stipulated prior to the entry into force of Resolution no. 16645 – i.e. before 13:59 hours on 1 October 2008 – or prior to the entry into force of Resolution no. 16652 – i.e. before 13:59 hours on 10 October 2008 (for shares
of banks or insurance companies listed on Italian regulated markets and for all other shares subject to the ban pursuant to paragraph 2 of the Resolution, respectively).
In this case, it is emphasised that the above-mentioned short sales must be backed by securities lending transactions from the time of transmission of the sale order.
If not, except in the case envisaged under point 8 below, the sale of underlying securities as hedging of derivative positions, in relation to contracts stipulated after the entry into force of Resolution no. 16645 or Resolution no. 16652 (for shares of banks and insurance companies listed on Italian regulated markets and all other shares subject to the ban pursuant to point 2 of the
Resolution, respectively) is classed as short selling.
d) The exemptions indicated in point c) above also apply to sales of underlying securities as part of delta hedging strategies on short derivative positions, as a result of the termination of contracts stipulated prior to the entry into force of Resolution no. 16645 or Resolution no. 16652 (for shares of banks and insurance companies listed on Italian regulated markets and all other shares
subject to the ban pursuant to point 2 of the Resolution, respectively) is classed as short selling.
e) The exemptions indicated in point c) above also apply to existing positions, with regard to shares in companies subject to share capital increases, on the day prior to that from which the strictest regime for the ban applies as described under paragraph 5 above.
7. Is any disclosure regime envisaged?
The Resolution envisages a ban on short selling on Italian regulated markets of shares listed on Italian regulated markets, in accordance with the terms described above.
No disclosure regime is envisaged (to the market or to the Authority) for short selling.
8. Can market makers, specialists and liquidity providers perform short sales?
The Resolution explicitly envisages that the ban does not apply to market maker activities, only with regard to those implemented in order to perform regular business activities. It should also be pointed out that the role of market maker does not correspond to that described in article 1, subsection 5-quater of Italian Legislative Decree no. 58 of 24 February 1998, with regard to
its restriction on regulated markets and multilateral trading facilities.
The concept of market maker, therefore, solely for the purposes of the ban on short selling, is not limited to the activities performed on regulated markets and multilateral trading facilities, but also concerns "off-market" transactions.
Similarly, the ban does not apply to specialists, as defined in the Regulation on Markets organised and managed by Borsa Italiana S.p.A., and to intermediaries operating in execution of a liquidity contract (i.e. liquidity providers), provided the action is implemented as part of their normal duties on regulated markets.
9. Are there any restrictions on security lending?
No. No ban is envisaged on the lending of shares listed on Italian regulated markets.
10. Is the recall of lent securities compulsory?
As already mentioned, exercise of the right of recall on previously lent securities, by the end of the trading day, allows the sale of the securities. In general, however, there is no obligation to recall lent securities.
