11 August 2011

CNMV temporary ban of short positions on financial stocks

The Spanish regulator decided to ban, as a temporary preventative measure with immediate effect, any legal or natural person from entering into transactions which might constitute or increase a net short position on Spanish financial stocks.

European securities markets, and particularly financial stocks, are going through a period of extreme volatility that is clearly influencing the stability of markets and might cause their disorderly functioning. In these conditions it is necessary to review the operation of securities markets in order to ensure financial stability.

Taking the above into account, together with the similar coordinated actions being fostered by some fellow European supervisors in the framework of ESMA, the CNMV has agreed to ban, as a temporary preventative measure with immediate effect, based on article 85.2 j of Law 24/1988, of 28th July, on Securities Markets (SMA), any legal or natural person from entering into transactions which might constitute or increase a net short position on Spanish financial stocks.

This prohibition will be effective during the next 15 days, and could be renewed if needed. This preventative ban affects any trade on equities or indices, including cash equities transactions, derivatives in regulated markets or OTC derivatives, that has an effect of creating a net short position or increasing a previous one, even if on an intraday basis. A net short position means any position resulting in a positive economic exposure to falls in the price of the stock.

Positions arising from market making activities will be exempted from this ban. For this purpose, market making covers investment firms that incur in a transitory (especially intraday) net short position either as:

• a response or a hedge to a client order; or
• as a result of quoting bid and ask prices on a continuous way as market members, with or without a public commitment with the issuer or the market.

The stocks affected by this agreement are, at this stage:

• Banca Cívica, S.A.
• Banco Bilbao Vizcaya Argentaria, S.A.
• Banco de Sabadell, S.A.
• Banco de Valencia, S.A.
• Banco Español de Crédito, S.A.
• Banco Pastor, S.A.
• Banco Popular Español, S.A.
• Banco Santander, S.A.
• Bankia, S.A.
• Bankinter, S.A.
• Caixabank, S.A.
• Caja de Ahorros del Mediterráneo
• Grupo Catalana de Occidente S.A.
• Mapfre, S.A.
• Bolsas y Mercados Españoles, S.A.
• Renta 4 Servicios de Inversion, S.A.

CNMV points out that article 99 and all its parts of the SMA defines as a very serious infringement any violation of preventative measures imposed by the CNMV under letter j of article 85.2 of the Law.

Press release

© Comisión Nacional del Mercado de Valores