Esma’s data underrepresents shorting activity
Undisclosed short interest could represent as much as $28bn, double the amount currently disclosed under the European Securities and Markets Authority’s (Esma) regulation 236/2012, according to Markit.
There are 442 publically disclosed short positions under the Esma rule which cover 250 companies with an aggregate value of $14.1bn.
"While noble in intent, Esma’s disclosure requirements do leave market observers with some unanswered questions around the extent of shorting activity that takes place below the disclosure threshold," said said Relte Stephen Schutte, analyst at Markit.
"Esma’s data does seem to underrepresent shorting activity overall, as the current aggregate value of the demand to borrow across the companies with publicly disclosed short positions represents $43.6bn, more than three times the aggregate value of disclosed positions.
"We estimate that the undisclosed data across Europe for the 453 companies represent another $28bn, almost double than that currently disclosed."
Regulation 236/2012 requires public disclosure of short positions in European listed equities where positions are greater than 0.5% of total shares outstanding for individual companies. Trading firms are obliged to report these figures to their national regulator in an overall effort to increase transparency and stability in capital markets.
The 442 disclosed short positions exceed the 0.5% threshold as of September 25.
While a third of the companies that have a disclosed short position are the target of a single fund, several see many more than that, for example we see ten disclosed shorts in Swedish firm Elekta.
Among the ten stocks which fall under the Esma disclosure requirement which sees the largest demand to borrow, the average gap between the public disclosed short positions and demand to borrow sits at 12.7% of shares outstanding.
Over the entire publicly disclosed universe, the average disclosed short interest stands at 1.7%. This is compared with the Markit Securities Finance average demand to borrow of 3.2% of shares outstanding.
Markit has extended its securities finance coverage with an innovative service to include all European public short disclosures. This service incorporates historical data where possible and was officially launched on October 27.
There are 442 publically disclosed short positions under the Esma rule which cover 250 companies with an aggregate value of $14.1bn.
"While noble in intent, Esma’s disclosure requirements do leave market observers with some unanswered questions around the extent of shorting activity that takes place below the disclosure threshold," said said Relte Stephen Schutte, analyst at Markit.
"Esma’s data does seem to underrepresent shorting activity overall, as the current aggregate value of the demand to borrow across the companies with publicly disclosed short positions represents $43.6bn, more than three times the aggregate value of disclosed positions.
"We estimate that the undisclosed data across Europe for the 453 companies represent another $28bn, almost double than that currently disclosed."
Regulation 236/2012 requires public disclosure of short positions in European listed equities where positions are greater than 0.5% of total shares outstanding for individual companies. Trading firms are obliged to report these figures to their national regulator in an overall effort to increase transparency and stability in capital markets.
The 442 disclosed short positions exceed the 0.5% threshold as of September 25.
While a third of the companies that have a disclosed short position are the target of a single fund, several see many more than that, for example we see ten disclosed shorts in Swedish firm Elekta.
Among the ten stocks which fall under the Esma disclosure requirement which sees the largest demand to borrow, the average gap between the public disclosed short positions and demand to borrow sits at 12.7% of shares outstanding.
Over the entire publicly disclosed universe, the average disclosed short interest stands at 1.7%. This is compared with the Markit Securities Finance average demand to borrow of 3.2% of shares outstanding.
Markit has extended its securities finance coverage with an innovative service to include all European public short disclosures. This service incorporates historical data where possible and was officially launched on October 27.
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