According to article 9 of the short selling regulation, 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 requires notification, cf. article 5 and 6 of the short selling regulation, the natural and legal person shall according to article 9 report the position to the relevant competent authority with correct details regarding the identity of the natural or legal person that holds the short position.
If the net short position is 0.2 % or more of the listed company’s issued 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. The European Markets and Securities Authority temporarily lowered the 0.2 % threshold to 0.1 %, effective from 16 March 2020. 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 % 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 % of the listed company’s issued share capital, it must be reported to the Danish FSA (from 16 March 2020 the threshold has been 0.1 %).
In mid-July 2020, Arrowstreet Capital informed the Danish FSA of an erroneous net short position in a Danish issuer’s share capital that Arrowstreet Capital had already reported to the Danish FSA a couple of months earlier. Furthermore, Arrowstreet Capital pointed out several other historical net short positions in the same issuer that had crossed relevant reporting thresholds, but never had been filed accordingly in the Danish FSA’s reporting system. Arrowstreet Capital explained that the errors had occurred because of inaccurate and outdated data in its own systems.
In May 2020, Arrowstreet Capital had filed a net short position in the Danish issuers’ share capital that was below the public disclosure threshold of 0.5 %, but above the reporting threshold of 0.1 %. The net short position that had been filed in May was half of what the actual position was. Arrowstreet Capital cancelled the erroneous short selling notification in July 2020.
In August 2020, the Danish FSA ordered Arrowstreet Capital to file the missing net short positions, which Arrowstreet Capital managed to do the same day it received the order. The Danish FSA also requested Arrowstreet Capital to provide a detailed explanation of how the errors had occurred as well as what initiatives the company had implemented, or would implement, in order for similar errors not to reoccur.
The Danish FSA does not regard Arrowstreet Capital’s explanation that inaccurate and outdated data in its own systems as an acceptable excuse for having filed a net short position with incorrect position size and to have missed filings of several other historical net short positions in a Danish issuer’s share capital. It is the short seller’s own responsibility to ensure that its calculations are based on accurate and current data.
In two other separate cases, Arrowstreet Capital has not met the requirements of the SSR. In both incidents, the Danish FSA expressed to Arrowstreet Capital the importance of filing correctly and on time according to the SSR. Furthermore, at the request of the Danish FSA, Arrowstreet Capital explained in January 2020 the initiatives it had implemented in order to fulfil its reporting obligations.
However, the Danish FSA finds that the implemented measures above has failed to make a sufficient difference. Thus, despite the actions taken, Arrowstreet Capital has continued to provide the Danish FSA with misleading information about net short positions in a Danish issuer’s share capital.
For more information on short selling, the Danish FSA refers to its website about short selling.