Prohibitions

The EU Short Selling Regulation prohibits uncovered short selling of shares and certain sovereign debt instruments. This also applies to the creation of, or entry into, sovereign credit default swaps (CDSs) other than for hedging purposes. In 2017, BaFin followed up on suspicious transaction reports and its own evidence in 100 cases (previous year: 97). The suspicious transaction reports related to sales by companies and private individuals. BaFin also received 72 voluntary self-reports.

It discontinued 79 investigations (previous year: 78), most of which related to voluntary self-reports due to minor infringements, caused by human error, for example a misunderstanding when the customer placed an order. As at 31 December 2017, the investigation of 19 cases had not yet been completed (previous year: 8); of this total, 1 dates from 2016 and 18 from 2017. BaFin referred another 6 cases to other EU authorities for reasons of competence (previous year: 11). 13 cases were pursued further in administrative fine proceedings (previous year: 11).

Transparency requirements

BaFin investigated 38 violations of the transparency requirements for net short positions in (previous year: 61). It discontinued a total of 26 investigations (previous year: 25). As at 31 December 2017, the investigation of 12 cases had not yet been completed (previous year: 18).

Net short positions are reported using BaFin's reporting and publishing platform. By the end of 2017, 1,190 companies and 23 private individuals had used the facility to submit a total of 2,431 applications for approval to use the system. As in previous years, most of the parties subject to the notification requirement came from the United States and the United Kingdom. In 2017, 285 parties subject to the notification requirement (previous year: 331) notified BaFin of a total of 12,861 net short positions (previous year: 14,492) in 281 different shares (previous year: 249) admitted to trading on a regulated market or multilateral trading facility. This corresponds to an average of 51 notifications per trading day. A total of 4,001 notifications (previous year: 4,151) had to be published in the Federal Gazette (Bundesanzeiger) in 2017, because the threshold of 0.5 percent of the share capital in issue had been crossed or reached. In addition, BaFin received 135 notifications for federal government debt securities (initial threshold: 0.5 percent), significantly more than in the previous year (94 notifications). By contrast, as in the previous year, there were no notifications for debt securities of the federal states (initial threshold: 0.1 percent). Most of the net short positions were built in shares by issuers on the regulated market (see Figure 13 "Notifications broken down by index").

Figure 13 Notifications broken down by index

Notifications broken down by index

BaFin

Notifications by market makers

In 2017, 44 market makers (previous year: 48) and 30 primary dealers (previous year: 32) notified BaFin of their activities and made use of the exemptions from the prohibitions on short selling and transparency requirements laid down in Article 17 of the EU Short Selling Regulation (see Table 23 "Notifications by market makers and primary dealers in 2017"). A total of 33 of the 44 market makers submitted notifications of intent, which are required when market makers expand their activities by adding a new instrument or when primary dealers extend their operations to include government debt securities of another issuer. In 2017, BaFin received a total of 1,570 notifications of intent (previous year: 1,207) from market makers and no notifications of intent from primary dealers (previous year: 1).

Table 23 Notifications by market makers and primary dealers in 2017

Notifications by market makers and primary dealers in 2017

* Non-EU third country. ** Domiciled outside Germany. BaFin