The proper and efficient functioning of the financial markets and a situation which enables investors to take informed investment decisions are key drivers behind European financial markets regulation. Obligations imposed on market participants to disclose long and short positions in certain financial instruments are an important tool to achieve these goals. In relation to long positions, the Transparency Directive has set the relevant standards while the Short Selling Regulation (SSR) has been introduced as a reaction to market turmoil at the beginning of the financial crisis to provide a coherent form of transparency for short positions. Notwithstanding the achieved level of European harmonisation, there is still some fragmentation – primarily in relation to long position disclosure requirements where the legal framework is not made up by a European regulation which has immediate effect in all member states.

Germany is one of the most important financial markets in Europe and therefore the German regulator (BaFin) plays an important role in connection with the enforcement of the transparency regimes. Position reporting in Germany follows different approaches for long and short positions, but both may result in an obligation to notify positions to the regulator, to the issuer or even to the public and they are also applicable to position holders outside Germany or the EU. In terms of long positions, the BaFin is, generally speaking, the competent authority for all issuers which are domiciled in Germany and whose shares are exclusively listed in Germany or which have opted for Germany being their home country. In terms of short positions, BaFin is, generally speaking, the competent authority for shares where the most liquid market is in Germany.

Apr-Jun 2015 Issue

King & Wood Mallesons