The Authority for the Financial Markets (AFM) and De Nederlandsche Bank N.V. (DNB; Dutch Central Bank) hereby acknowledge that in view of the exceptional market conditions and after consultations between the AFM and the other supervisors responsible for supervision of Euronext, the AFM announces that it will take measures concerning the naked short selling of shares issued by financial companies.
DNB welcomes this announcement from the point of view of financial stability.
- The measures concern (depository receipts of) shares issued by financial companies which are traded on the Euronext Amsterdam stock exchange; these shares concern transactions performed on own account or on behalf of third parties, with the exception of transactions performed by intermediaries acting as cash market maker1 or counter party in block trade transactions.
- All selling orders resulting in postponed settlement/delivery concerning one of the (depository receipts of) shares involved must be covered for 100% by the financial instruments that are the subject of the selling orders.
- These measures are intended to improve the integrity and the proper operation of the financial market. The measures especially seek to prevent that transactions or orders occur that give or may give false or misleading signals about the supply and demand or the price of financial instruments as meant in article 5:58 of the Financial Supervision Act (‘FSA’).
- Parties should observe these measures from Monday 22 September 2008 for a period of three months. Both the duration and the content of these measures may be adjusted or withdrawn before the end of this term.
- A transaction or order or a combination of transactions or orders that in itself does not come under the above measures, but may bring about the same effect, can also be deemed to fall under the prohibition contained in article 5:58 FSA.
- Each Party having a cumulated net economic short position exceeding 0.25% of the capital of one of the financial companies involved, is requested to report these positions to the AFM immediately, but not later than on the next working day (t+1) after their realization. We assume market parties will comply. Official legislation to ratify this measure is being prepared.
Where market parties act contrary to the above, the competent authorities will, if necessary, take legal action.
In order to limit the causes of the distortion in the market the Parties are requested to refrain from lending the (depository receipts of) shares concerned, except for covering transactions already concluded before 22 September 2008.
1 Cash market maker: This concerns the same position as that of the market makers meant in the Euronext Rule Book, both concerning the cash and the derivatives trade.
