Background
According to the short selling regulation, article 9, a natural or legal person who has a short position shall at midnight on the trading day on which the position is achieved calculate the net short position.
If the net short position is 0.2 percent or more of the listed company’s is-sued share capital, the natural or legal person shall report the position to the relevant competent authority no later than 3:30 pm on the following trading day. For shares admitted to trading on Danish trading venues, the Danish FSA is the relevant competent authority. If the net short position is 0.5 percent or more of the listed company’s issued share capital, the Danish FSA will publish the net short position on its website. If the net short position falls below the threshold of 0.2 percent of the listed company’s issued share capital, it must be reported to the Danish FSA.
On 25 March 2019, Squarepoint Ops LLC (“Squarepoint”) voluntarily contacted the Danish FSA notifying the Danish FSA that Squarepoint had identified internal issues that had affected its net short selling notifications regarding the issued share capital of listed Danish companies since it started submitting short selling notifications to the Danish FSA.
Squarepoint pointed out that the issues resulted in Squarepoint missing a total of 38 short selling notifications in the period from 28 September 2017 to 21 September 2018 that should have been reported to the Danish FSA. The issues also resulted in Squarepoint, in the period from 16 October 2017 to 8 October 2018, reporting eight incorrect short selling notifications, of which seven needed to be cancelled and one that needed to be amended. Squarepoint requested clarity in the process of reporting missing short selling notifications and amending incorrect short selling notifications, as well as assistance in carrying out these actions.
In none of the above-mentioned occasions did the net short position pass the publication threshold of 0.5 percent or more of the listed company’s issued share capital. I.e. none of the affected net short positions have been published or should have been published on the Danish FSA’s website.
Squarepoint has informed the Danish FSA that the missing short selling notifications and the incorrect reported short selling notifications were due to internal issues in its systems and processes. However, the implementation of corrective measures has been in effect since 8 November 2018, and Squarepoint has thus informed the Danish FSA that all short selling notifications made since 8 November 2018 have been correct. Given the measures taken by Squarepoint, the Danish FSA expects that Squarepoint will not miss any future short selling notifications and that correct short selling notifications will be made from now on.
The Danish FSA clarified that actions to correct historical records must be taken and ordered Squarepoint to report the missing short selling notifications and to amend the incorrect short selling notifications that have already been reported. Squarepoint and the Danish FSA have together concluded corrective actions.
Furthermore, the Danish FSA has reprimanded Squarepoint for the prolonged delay in its disclosure to the Danish FSA of the missing and incorrect notifications of its net short positions, taking into account the date at which Squarepoint itself became aware of the internal issues and to the extent that the issues might have affected its net short selling notifications to the Danish FSA.
For more information on short selling, the Danish FSA refers to its website www.finanstilsynet.dk.