Important note
The notes compiled on this page provide further guidance on the EU Short Sale Regulation and the net short sale positions published by the reporting registries.

EU Short Selling Regulation - Supplementary Information

The EU Short Selling Regulation (EU Short Selling Regulation) is a legal framework introduced in the European Union to regulate the practice of short selling of shares and other financial instruments. Short selling is a process whereby an investor sells a security that he does not own in the expectation that the price of that security will fall and he can later buy it back at a lower price.
The regulation aims to reduce the risk of excessive price volatility and market abuse that can result from uncontrolled or speculative short selling. It contains provisions on the transparency of short selling activities and establishes certain requirements and restrictions on short selling.
Here are some key features of the EU Short Selling Regulation:

1 Reporting requirements

The regulation requires investors to report short positions to national financial regulators when they reach certain thresholds. There are two levels to this. When the investor reaches a net short position equal to 0.1% of a company's issued share capital, it must report that position to the national regulator. When the position reaches or exceeds 0.5%, it is made public.

2 Restrictions on uncovered short selling

The regulation prohibits uncovered short selling. This means that when a short seller enters into a transaction, he must prove that he is able to deliver the security that he has sold short. This is intended to prevent short sellers from selling securities they cannot deliver, which can cause market disruptions.

3 Regulatory Interventions

The regulation allows regulators to intervene in the market in exceptional situations. This could include, for example, a temporary ban on short selling, or certain restrictions on certain financial instruments.

The information published by the recording agencies typically includes the identity of the short seller, the size of the short position, and the security in question. This transparency helps maintain a fair and stable financial system by ensuring that market participants are aware of short selling activity.

Short sale statistics within the information offering

The recording of short selling activities is mandatory at the EU level for all national supervisory authorities grouped under ESMA. Each EU member state records short sale activity individually. The reporting registers act autonomously, the publication is decentralized, a uniform register at EU level, does not exist at the time of writing these notes.

With the expansion of the existing information offer of mandatory notifications, analyst ratings or directors dealings, the aim is to give interested investors,existing and future investors, journalists, market research institutes, universities or shareholder representatives the opportunity to initiate further research from a central location.

Only official publicly available sources will be used in processing the data.

In order to improve the comprehension and comprehensibility of the data records published via the civil registers, reevant core information is elaborated by textual and visual elements. This form of presentation is particularly helpful to people who are less familiar with the subject matter.

The reports of the population registers are processed automatically and enriched at various points with data, whose calculation basis of the source information represent. Due to different publication procedures, a complete verification and plausibility check is not possible. The processing of the data thus refers exclusively to the interpretation of existing raw data.

When you perform a more comprehensive analysis, you will notice that the overviews include companies that today operate under a different name, have been merged with other companies, no longer exist, or are no longer relevant due to other factors. One possible reason why reporting registries report the data is to provide transparent and complete disclosure of historical transactions.

The source data is processed with great care. We would like to point out that they can only be a starting point for further research. They do not serve as anything more than an indication that must necessarily be verified by other sources before being used in any other way.

Despite extensive quality assurance measures, we cannot fundamentally exclude errors. Since the data is processed automatically, we basically trust that data is processed in a standardized manner and that manual subsequent errors are avoided as a result. This is always guaranteed if the data source is available and the data is of the quality required for downstream processes. Technical errors can occur at different points in process chains. Basically, they cannot be excluded. For the interpretation of data, this means that data gaps, incorrect calculations or missing updates can represent a scenario that does not correspond to the actual reality.

When doing your own research, you will notice the use of different company names. One reason for this is that the registration in the population registers is not always based on the name of the company as it is recorded in the commercial register. If different names are recorded in the registration reports, these are shown separately.

Some reporting registries refrain from updating short positions that fall below the 0.50% in the reports. Thus, it is not possible to determine beyond doubt from the source data provided whether the current position is 0.50%, is below this threshold (less than 0.50%), or has already been liquidated (0.00%). While histories are largely documented without gaps at the Bundesanzeiger (Germany), this level of detail is not available in Sweden.

Data forensic

In connection with the analysis of the data, further conspicuous features can be identified in addition to the patterns already outlined above. Basically, the underlying assumption is that short selling follows market momentum. Sell & hold strategies that "run" positions unchanged over a longer period of time are rarely observed as dominant investment approaches. They do exist, but in this case they usually correlate with a positive price development for the short seller. Hedge funds / short sellers are active market participants whose commitment is characterized by frequent position adjustments. A more intensive examination of the reporting statistics reveals that short sellers do not bear any characteristics of classic "day trading". Short positions are not opened and closed. They are increased or reduced. For some companies, the histories show positioning over several years with many, sometimes only small, proportional changes.

With regard to the overall weighting, a margin of error must be taken into account. The background to this is that, as previously mentioned, it is not possible to determine exactly how high or low the positions are below the 0.5% threshold.

Criteria such as "date of last report" and "position size" are suitable for determining approximate values. You will find in the overviews (ex. Belgium, Tessenderlo, ISIN BE0003555639) a short seller position from 2014, which is above the reporting threshold of 0.50% (0.58%). That a short seller leaves positions unchanged for several months is unlikely. Such and similar constellations should be taken into consideration. We advise against "unfiltered" use and lack of quality assurance.

Developer Roadmap

The ayondo community spirit is also anchored in tool development. We regularly receive requests and suggestions on how the usability of the apps can be improved in terms of usability, informative value or presentation. If user feedback is technically feasible, it is included in the developer roadmap and implemented.

Innovations in the scope of functions
Module: WWR --> Separation of short sale positions according to proportional distribution.
Status: February 2023 | last updated June 2023