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1. Background
On 23 July 2012,
the Spanish National Securities Market Commission (Comisión Nacional
del Mercado de Valores, “CNMV”) adopted a
precautionary ban on any trade on shares or indexes, including spot
transactions, derivatives in regulated markets or over-the-counter
derivatives, which took or increased a net short position on shares
admitted to trading on an official Spanish secondary market (the “Previous
Ban”).
Initially
adopted for a period of three months, on 19 October 2012 the CNMV
decided to extend the Previous Ban in order to keep it effective until
31 October 2012. Beyond that date, the Previous Ban had to be
necessarily lifted, as 1 November 2012 was the date of commencement of
the Regulation (EU) No. 236/2012 of the European Parliament and of the
Council of 14 March 2012 on short selling and certain aspects of credit
default swaps (“EU Regulation”), which subjects the
adoption of restrictions on short selling to a specific regime of
communication to the European Securities and Markets Authority (“ESMA”)
and the relevant competent authorities. Since the Previous Ban had been
adopted without the observance of the EU Regulation procedure, its
existence was incompatible with the coming into force of said Regulation.
In view of the
persistence of the exceptional situation that originally led to the
adoption of the Previous Ban, characterised by uncertainties with
respect to a Spanish financial system that is currently undergoing a
restructuring process, on 19 October 2012 the CNMV decided to initiate a
communication process to the ESMA in order to impose a new ban on short
selling in accordance with the EU Regulation.
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2. new ban
On 1 November
2012, after the issuance of a favourable opinion by the ESMA, the CNMV
announced its decision to impose, with immediate effects, a new
precautionary ban on transactions by any natural or legal persons which
create or increase a net short position on shares listed on a Spanish
official secondary market (the “New Ban”). A short
position is any position that entails positive economic exposure in
connection with falls in share prices.
The specific
wording of the New Ban does not use the term ‘net short position’, but
instead defines the concept of transactions that create or increase a
net short position, i.e., those that:
“create a
financial instrument or are linked to a financial instrument where the
effect or one of the effects of the transactions is to confer a
financial advantage [...] in the event of a decline in the price or
value of shares”.
According to
Directive (EC) No. 2004/39 of the European Parliament and of the Council
of 21 April 2004 on markets in financial instruments (“MIFID”),
the term ‘financial instrument’ includes, among others: (i) transferable
securities; (ii) money-market instruments; (iii) units in collective
investment undertakings; (iv) options, future, swaps, forward rate
agreements and any other derivative instruments relating to securities,
interest rates or yields, other derivatives, financial indices,
financial measures, commodities, official economic statistics, or any
other asset or right; (v) derivative instruments for the transfer of
credit risk, and (vi) financial contracts for differences.
Assuming that
the FAQ document released by the CNMV on 23 July 2012 with respect to
the Previous Ban is applicable to the New Ban (and as long as it does
not contradict the EU Regulation or the provisions issued for its
interpretation), the latter will apply to all natural and legal persons
irrespective of their country of residence and regardless of whether the
transaction is carried out in Spain or abroad. Likewise, it will apply
to intraday trading.
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3. Affected securities
The New Ban
affects shares admitted to listing on an official Spanish secondary
market for which the CNMV is the competent authority according to the
MIFID regulations. This refers to markets of Member States on which the
shares were first admitted to trading and, in the event of a
simultaneous admission in several Member State markets, the most liquid
market.
Consequently,
the New Ban will not affect some foreign issuers’ shares admitted to
listing on Spanish stock exchanges (e.g., those of ArcelorMittal, Bayer,
EADS, Enel Green Power, and Reno de Medici). It is not applicable to
shares of companies that are traded on the Latibex Market or the
Alternative Stock Market as they are neither official secondary markets
nor regulated markets.
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4. exceptions
The New Ban will
not affect market making transactions carried out by entities that must
have been previously authorised by the CNMV to act as market makers.
Provided that the FAQ document referred to above is applicable, prior
request by the market maker of the exemption and subsequent approval by
the CNMV will be necessary.
Additionally,
and in contrast with the Previous Ban, the New Ban will not affect net
short positions created or increased as a result of:
a.
Transactions whose main objective is industrial- or business-related,
after being authorised by the CNMV.
b.
Transactions made in the framework of a process of stabilisation of a
financial instrument initiated according to chapter III of Regulation
(EC) No 2273/2003 of 22 December 2003.
c. The
acquisition of a convertible bond that has a delta-neutral position
between the equity component of the convertible bond and the short
position taken to cover that component.
d. Any
creation or increase of net short positions that is hedged by a
purchase that is equivalent in terms of proportion on subscription
rights.
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5. entry into force
The New Ban
entered into force at 8:30:00 hours (CET) on 1 November 2012 and will
remain in force until 24:00:00 hours (CET) on 31 January 2013. The CNMV
may lift the ban at any time or, if the grounds for its adoption
continue to apply, extend it upon its expiry.
London, November
6th, 2012
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For further
information, please consult your regular contact at Uría Menéndez or any
of the following persons:
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