FAQ ON THE PROHIBITION TO TAKE OR INCREASE NET SHORT POSITIONS (resolution no. 17992 of November 11, 2011)
Updated version of January 12, 2012
In relation to the issues listed below, please refer to the Instructions and FAQ regarding Resolution no. 17862 of July 10, 2011 on reporting obligations of net short positions, on the understanding that the reporting obligations introduced by Resolution no. 17862 are supplemented by the prohibition to take or
increase net short positions set forth in Resolution no. 17902:
-
calculation of the net short position (Instructions to Resolution no. 17862);
-
types of financial instruments included in the calculation of the net short position (Question no. 2 of FAQ regarding Resolution no. 17862);
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OTC transactions (Question no. 3 of FAQ regarding Resolution no. 17862);
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securities lending transactions (Question no. 4 of FAQ regarding Resolution no. 17862);
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definition of delta (Question no. 5 of FAQ regarding Resolution no. 17862);
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exemption for market makers, specialists and liquidity providers (Question no. 6 of FAQ regarding Resolution no. 17862);
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level of consolidation of the positions in connection with legal entities (Question no. 8 of FAQ regarding Resolution no. 17862).
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positions held at more than one intermediary (Question n. 9 of FAQ regarding Resolution no. 17862).
1. Who is subject to the prohibition?
The prohibition applies to any natural person, legal person and other entity, both Italian and foreign, with the exception of the persons exempted under point 3 of the Resolution (market makers, specialists and liquidity providers).
2. To which shares does the prohibition to take net short positions apply?
The prohibition applies to the shares referred to in the list published on Consob’s website.
3. Are transactions in index derivatives allowed where the underlying index includes financial instruments to which the prohibition applies?
Investors (not exempted) holding open long positions on the equity market or on a basket of shares referred to in the list attached to Resolution no. 17902 are allowed under certain conditions to hedge the relevant risk carrying out transactions in index derivatives or other financial instruments on index (e.g. ETF).
In this context, Consob allows to take net short positions in the securities subject to the prohibition that may result from that trading in index derivatives or other financial instruments on index, provided that they are marginal and the trading of the index aims at hedging the general market risk of investor’s portfolio.
However, trading strategies combining transactions on index derivatives or other financial instruments on index and other transactions with the aim of circumventing the short selling ban are prohibited.
You can find below an example of trading strategy in index derivatives which entails a prohibited holding of a net short position:
-
to purchase future contracts on shares not subject to the prohibition, and subsequently
-
to sell future contracts on an index which includes shares not subject to the prohibition - in order to hedge the transactions mentioned in the bullet point above – as well as shares subject to the prohibition.
4. What does an investor need to verify before selling financial instruments whose value is linked to the price of shares attached to Resolution no. 17902?
Before giving a sale or a purchase order, an investor (not exempted) must verify that the financial instruments sold or purchased do not create or increase a net short position.
Taking or increasing a net short position during the trading day is prohibited, even if the investor intends to close the position before the end of the trading day.
5. What must be done by an investor who opened a net short position before the entry into force of Resolution no. 17902?
The investor (not exempted) who opened a net short position before the entry into force of the Resolution can keep it unchanged or reduce it. In no case, the investor can increase the net short position. For increases of net short positions due to a variation of the delta of financial instruments included in the portfolio see Question no. 14.
In case an investor entered, before the entry into force of the Resolution (at 9.00 a.m. of August 12, 2011), an order which, if executed, would have created or increased a net short position and the order was not executed when the Resolution entered into force, the investor must cancel the order.
6. Is Resolution no. 17862 of July 10, 2011, which introduced reporting obligations of net short positions, still in force?
Yes. As a consequence, both the prohibition to take or increase net short positions and the obligation to report to Consob any change (de facto, only a reduction is allowed) in the net short positions previously opened apply to the shares referred to in the list attached to Resolution no. 17902.
7. In case an issuer referred to in the list attached to Resolution no. 17902 issued both preferred stocks and ordinary shares, is it possible to use preferred stocks to hedge short positions in ordinary shares (and vice versa)?
Yes, the various types of shares issued by the same issuer are included in the calculation of the same net short position. Therefore, it is possible to purchase ordinary shares and sell preferred stocks or purchase preferred stocks and sell ordinary shares, subject to the obligation to hold a long position before carrying out the selling transactions.
8. Is it possible, after the entry into force of Resolution no. 17902, to take a new net short position lower than 0.2% of the share capital of the issuers referred to in the list?
No. After the entry into force of Resolution no. 17902, it is prohibited to take a new net short position in shares referred to in the list attached to Resolution no. 17902, regardless of the size of the position. Transactions in index derivatives carried out for hedging purposes are exempted as indicated under Question no. 3 above.
9. Does the prohibition under Resolution no. 17902 also apply to transactions carried out on MTFs outside Italy?
Yes. The prohibition applies regardless of the trading venue where transactions are executed. Therefore, the prohibition applies to transactions carried out on MTFs outside Italy as well as to OTC transactions (see also Question no. 3 of the FAQ regarding Resolution no. 17862).
10. Can an investor who held, before the entry into force of the short selling ban, a short position in an expiring future roll-over the position to another future expiring on a later date?
Yes, provided that the roll-over of future contracts does not create a new net short position or increase a previous one. The roll-over of the net short positions taken before the entry into force of the ban to similar instruments expiring on a later date is allowed also with respect to other expiring derivative instruments, provided that the roll-over does not create a new position or
increase a previous one.
11. Are transactions on ETFs, covered warrants and certificates covered by the ban?
Yes. Transactions on ETFs, covered warrants and certificates must be included in the calculation of the net short position. Moreover, all purchases of financial instruments which entail a bearish position, such as the purchase of put options or of “reverse” ETFs, shall be considered as short positions (see also question no. 2 of the FAQ on resolution no. 17862).
12. In case of capital increase including option rights, is possible to acquire the rights and sell a corresponding number of shares?
Yes, in fact option rights are included in the calculation of the net short position (see also instructions to resolution no. 17862).
It has to be noted that, according to instructions to resolution no. 17862, investor need to apply the relevant delta to option rights.
In case of variation of delta, FAQ n. 14 will also apply.
Moreover, the ban on naked short selling on shares, established by Consob Resolution no. 17993 of 11 November 2011, remains unaffected.
The obligation to deliver the shares in time for the settlement remains unaffected.
13. In case of a long position on convertible bonds, is it possible to take a short position on a corresponding number of shares?
Yes, in fact convertible bonds are included in the calculation of the net short position (see also instructions to resolution no. 17862). The obligation to deliver the shares in time for the settlement remains unaffected.
14. What should the investor do in case the net short positions increases due to a variation of the delta of financial instruments included in the portfolio?
The ban concerning the taking or increasing of net short positions applies also to intraday transactions. However, in case the delta variation entails a new net short position the investor must close the position at the beginning of the following day.
In case of short positions held before the entry into force of resolution no. 17902 and which increase subsequently due to a delta variation the investor must revert to the previous position at the beginning of the following day.
15. If an investor underwrites a standby commitment in a capital increase operation, can he consider the offered guarantee as a long position in the share under capital increase?
No, the guarantee offered on a capital increase operation is not enough to be configured as a long position in the share of the issuer. Too much uncertainty remains with regard to the evaluation of the equivalent long position. Moreover, the EU Regulation on short selling and certain aspect of credit default swaps does not envisage such possibility.
16. If an investor exercises a phisically-settled call option, an option rights ora a similar financial instruments, what long position will he consider in the time between the exercise of the option and the delivery of the shares?
If the investor exercises a call option, he can assume his long position to be composed by the shares he will receive. The same applies in the case of option rights, provided that the exercise is irrevocable.
Further questions on the implementation of Resolution no. 17902 can be sent to:
post - trading@consob.it
ANSWERS TO FREQUENTLY ASKED QUESTIONS CONCERNING THE REPORTING OF NET SHORT POSITIONS ON SHARES (resolution no. 17862 of July 10, 2011 extended by resolution no.
17951 of September 28, 2011)
Updated version of September 30, 2011
1. What are the issuers covered by the reporting obligations of net short positions on shares?
The reporting shall be made in connection with net short positions relating to issuers whose shares have an Italian regulated market as their principal trading market.
To this purpose, please see the database published by ESMA at the following address: http://mifiddatabase.esma.europa.eu/.
2. What type of financial instruments shall be included in the calculation of the short net position?
The calculation of the net short position shall include all types of financial instruments whose value is linked to the value of shares of a given issuer.
For the above purpose, the positions held on shares of an issuer covered by the reporting regime and the positions on financial instruments whose value is linked to such shares, or to a basket of financial instruments or index that, at least in part, contain such shares, shall all have to be included.
As regards shares, all types of issued shares shall be considered both in the calculation of the denominator and in the calculation of the net short position.
In this respect, for example and without prejudice to the inclusion of additional types of instruments in the calculation, the following transactions, among others, shall have to be considered: purchases or sales of shares, Exchange Traded Funds (ETFs), American Depositary Receipts (ADRs) and similar certificates representing shares, covered warrants and certificates;
transactions on options, swaps, futures and contracts for difference.
With reference to ADRs and similar certificates representing shares, the shares held by the depositary bank in view of the issuance of such certificates shall not be considered in the calculation of the net short position.
As regards derivative financial instruments, they shall be included in the calculation of the net short position, regardless of whether they are physically or cash settled.
Purchases and sales of convertible bonds, warrants and all those financial instruments which entail a bearish position, such as ETFs which replicate the reverse return of a security or an index (so called “short ETFs” or “reverse ETFs”) shall also be considered in the calculation of the net short positions.
Conversely, positions on credit default swaps (CDS) shall not be considered in the calculation of the net short position.
3. Shall OTC transactions be included on the calculation of the net short position?
The calculation of the net short position shall include all transactions on the financial instruments mentioned in the response to the previous question, regardless of their trading venue.
4. How shall securities lending transactions be treated?
Securities lending transactions are not considered in the calculation of net short positions. As a consequence, the lent shares fall within the calculation of the long position of the lender, and are excluded from the position of the borrower.
5. What does delta mean in the calculation of the net short position?
The delta indicates how much a financial instrument’s theoretical value would move in case of an underlying instrument’s price variation. The delta permits to determine the net short position held on financial instruments whose value is linked to the value of underlying instruments, in terms of equivalent number of shares.
For the purpose of the calculation of the net short position subject to reporting, the delta shall be calculated with reference to the closing price of the underlying financial instrument.
6. Are market makers, specialists and liquidity providers exempted from the net short positions related reporting regime?
Resolution no. 17862 expressly provides that the reporting obligations shall not apply to the activity carried out by market makers in the exercise of their own functions.
Moreover, it shall be stressed that the meaning of market maker differs from the one provided for under article 1, paragraph 5-quarter of Legislative Decree no. 58 of 24 February 1998, as regards the limitation to the regulated markets and multilateral trading facilities therein contained.
Indeed, for the sole purposes of reporting net short positions, the concept of market maker shall not be limited to the activity carried out on regulated markets and multilateral trading facilities, but shall comprise also any off-market activities. For example, systematic internalizers are considered as market makers for the purposes of Resolution no. 17862.
Similarly, the reporting regime shall not apply to specialists, as defined in Regulation of the Markets organized and managed by Borsa Italiana S.p.A., and to intermediaries acting in execution of a liquidity contract agreed with the issuer (liquidity providers), insofar as the relevant activity is
carried out in the exercise of their own functions in regulated markets. Therefore, the activity carried out outside regulated markets is excluded.
In general, the exemption for market makers, specialists and liquidity providers has been granted on the basis of the analysis of the relevant contracts as of August 11, 2011. Consob will assess if the new contracts are covered by the Resolution and can benefit from the relevant exemptions.
Furthermore, as regards exclusively transactions on stocks executed on regulated markets and/or multilateral trading facilities, for the purpose of the said exemption, the status of market maker or liquidity provider, in the exercise of their own functions, can be granted only to securities that need a support to liquidity,
such a condition not being satisfied, for instance, by securities belonging to the FTSEMIB index.
It shall be specified that the long and/or short positions (if any) undertaken in the course of said activity shall not be considered in the calculation of the net short position of the relevant person, even when they are carried out under the responsibility of a decision centre shared with other business units.
7. Are the information reported to Consob expected to be published?
Resolution no. 17862 provides a reporting regime exclusively to the Authority. As a consequence, no reported information on net short positions will be communicated to the market.
8. What is the level of consolidation of the positions in connection with legal entities?
The instructions to Resolution no. 17862 provide that, as a general rule, legal entities shall calculate only one net short position. However, with reference to legal entities having autonomous decision centres, the single net short positions of the person responsible for the investment decisions shall have to be consolidated. For this purpose, each relevant entity shall be in
charge of individuating, for each activity it carries out, the person responsible for making the decisions.
Having said so, as regards management companies and other legal entities that manage investments on behalf of their clients, the positions of each client shall be consolidated among themselves, at the level of each decision centre, only when they are the outcome of discretionary managements.
Conversely, in case of non-discretionary managements, the positions shall have to be calculated at the level of each single client, who shall also be responsible for the relevant reporting.
9. In case an investor has relations with more than one intermediary, shall he/she consider them in the calculation of the net short position?
Yes. When calculating the net short position, the investor must take into account all the positions in financial instruments in relation to which he/she is the person responsible for investment decisions, even if such positions are held at different intermediaries.
FAQ ON THE PROHIBITION TO TAKE OR INCREASE NET SHORT POSITIONS (RESOLUTION NO. 17902 OF AUGUST 12, 2011)
Updated version of August 18, 2011
In relation to the issues listed below, please refer to the Instructions and FAQ regarding Resolution no. 17862 of July 10, 2011 on reporting obligations of net short positions, on the understanding that the reporting obligations introduced by Resolution no. 17862 are supplemented by the prohibition to take or increase
net short positions set forth in Resolution no. 17902:
-
calculation of the net short position (Instructions to Resolution no. 17862);
-
types of financial instruments included in the calculation of the net short position (Question no. 2 of FAQ regarding Resolution no. 17862);
-
OTC transactions (Question no. 3 of FAQ regarding Resolution no. 17862);
-
securities lending transactions (Question no. 4 of FAQ regarding Resolution no. 17862);
-
definition of delta (Question no. 5 of FAQ regarding Resolution no. 17862);
-
exemption for market makers, specialists and liquidity providers (Question no. 6 of FAQ regarding Resolution no. 17862);
-
level of consolidation of the positions in connection with legal entities (Question no. 8 of FAQ regarding Resolution no. 17862).
1. Who is subject to the prohibition?
The prohibition applies to any natural person, legal person and other entity, both Italian and foreign, with the exception of the persons exempted under point 3 of the Resolution (market makers, specialists and liquidity providers).
2. To which shares does the prohibition to take net short positions apply?
The prohibition applies to the shares referred to in the list published on Consob’s website.
3. Are transactions in index derivatives allowed where the underlying index includes financial instruments to which the prohibition applies?
Investors (not exempted) holding open long positions on the equity market or on a basket of shares referred to in the list attached to Resolution no. 17902 are allowed under certain conditions to hedge the relevant risk carrying out transactions in index derivatives.
In this context, Consob allows to take net short positions in the securities subject to the prohibition that may result from that trading in index derivatives, provided that they are marginal and the trading of the index aims at hedging the general market risk of investor’s portfolio.
However, trading strategies combining index derivatives transactions and other transactions with the aim of circumventing the short selling ban are prohibited.
You can find below an example of trading strategy in index derivatives which entails a prohibited holding of a net short position:
-
to purchase future contracts on shares not subject to the prohibition, and subsequently
-
to sell future contracts on an index which includes shares not subject to the prohibition - in order to hedge the transactions mentioned in the bullet point above – as well as shares subject to the prohibition.
4. What does an investor need to verify before selling financial instruments whose value is linked to the price of shares attached to Resolution no. 17902?
Before giving a sale or a purchase order, an investor (not exempted) must verify that the financial instruments sold or purchased do not create or increase a net short position.
Taking or increasing a net short position during the trading day is prohibited, even if the investor intends to close the position before the end of the trading day.
5. What must be done by an investor who opened a net short position before the entry into force of Resolution no. 17902?
The investor (not exempted) who opened a net short position before the entry into force of the Resolution can keep it unchanged or reduce it. In no case, the investor can increase the net short position.
In case an investor entered, before the entry into force of the Resolution (at 9.00 a.m. of August 12, 2011), an order which, if executed, would have created or increased a net short position and the order was not executed when the Resolution entered into force, the investor must cancel the order.
6. Is Resolution no. 17862 of July 10, 2011, which introduced reporting obligations of net short positions, still in force?
Yes. As a consequence, both the prohibition to take or increase net short positions and the obligation to report to Consob any change (de facto, only a reduction is allowed) in the net short positions previously opened apply to the shares referred to in the list attached to Resolution no. 17902.
7. In case an issuer referred to in the list attached to Resolution no. 17902 issued both preferred stocks and ordinary shares, is it possible to use preferred stocks to hedge short positions in ordinary shares (and vice versa)?
Yes, the various types of shares issued by the same issuer are included in the calculation of the same net short position. Therefore, it is possible to purchase ordinary shares and sell preferred stocks or purchase preferred stocks and sell ordinary shares, subject to the obligation to hold a long position before carrying out the selling transactions.
8. Is it possible, after the entry into force of Resolution no. 17902, to take a new net short position lower than 0.2% of the share capital of the issuers referred to in the list?
No. After the entry into force of Resolution no. 17902, it is prohibited to take a new net short position in shares referred to in the list attached to Resolution no. 17902, regardless of the size of the position. Transactions in index derivatives carried out for hedging purposes are exempted as indicated under Question no. 3 above.
9. Does the prohibition under Resolution no. 17902 also apply to transactions carried out on MTFs outside Italy?
Yes. The prohibition applies regardless of the trading venue where transactions are executed. Therefore, the prohibition applies to transactions carried out on MTFs outside Italy as well as to OTC transactions (see also Question no. 3 of the FAQ regarding Resolution no. 17862).
10. Can an investor who held, before the entry into force of the short selling ban, a short position in an expiring future roll-over the position to another future expiring on a later date?
Yes, provided that the roll-over of future contracts does not create a new net short position or increase a previous one.
Further questions on the implementation of Resolution no. 17902 can be sent to:
sdme@consob.it
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;
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Subject to the exercise of stock options;
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Subject to exercise of the right to convert convertible bonds into shares;
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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.
