This article has been updated to include the AMF press release of 15 April 2020.
The president of the AMF has banned net short positions in consideration of the “adverse events related to the spread of the Covid-19 virus that constitute a serious threat to financial markets confidence and to the extent that such measures are necessary to avert the threat”.
This measure, which initially applied until 6 April 2020, has been extended until 16 April 2020 by the collège of the AMF. On 15 April 2020, a few days after President Emmanuel Macron extended the lockdown related to the spread of Covid-19, the AMF decided to extend the ban on net short positions until 18 May 2020.
As a reminder, the notion of short position is linked to that of short selling. Generally speaking, short selling consists in borrowing a security to sell it and to buy it afterwards at a lower price, thus realizing a capital gain compared with the initial selling price. In financial jargon a short position means an investor sells a security with a view to buy afterwards at a lower price.
The AMF has indicated that a net short position is sum of all short positions minus all long positions held by an investor. For instance, the following transactions shall be considered in the calculations:
- Purchases or sales of shares;
- Transactions in options, swaps, futures, contracts for difference, covered warrants, certificates.
The AMF has specified that this measure applies to securities admitted to trading on a French trading venue regulated by the AMF as long as its most liquid market is located in France. In practice, the ban applies to a security if:
- The security does not appear in the exempt securities register;
- The relevant authority of the security in Europe is FR (see the FIRDS register).
In order to make the identification if this criteria easier, the AMF has published a list of securities that fall within the scope of the ban.
The AMF has also specified that the ban applies to instruments included in the calculation of the net short position, like derivatives, depositary receipts, etc.
The AMF has published an English-language Q&A relating to said ban. It was last updated on 26 March 2020.
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