Frequently asked questions about the general decrees
- Bonn/Frankfurt a.M.,
- 2009/03/30
Please note that the translation of the FAQs is provided for information purposes only. The original German text is binding in all respects.
1. Does the ban also apply to short sales backed by securities lending?
No, the General Decree only prohibits transactions in the specified shares that are not backed by securities lending. In other words, only naked short transactions (uncovered transactions) are affected.
2. When do the securities lending transactions have to have been concluded?
The securities lending transactions have to have been concluded prior to or at least simultaneous with the respective transaction. It is sufficient that at the time of the conclusion of the transaction an absolutely enforceable legal claim on the borrowed shares already exists. It is not necessary that the shares have already been booked into the account of the borrower.
3. Does the ban also concern intraday short positions?
Yes.
4. Does the short selling ban also concern the sale of futures (short futures) and the purchase of put options (long puts)?
No. The General Decree only refers to naked short transactions in shares.
5. Does the General Decree also apply to trading in short products, such as short warrants or short certificates?
Restrictions may arise for trading in short positions if the risk positions created thereby are hedged by a short sale of shares. If, however, hedging is performed by the sale of a future or a similar instrument, this is not subject to the restriction on short selling.
6. To what extent are market makers concerned by the ban?
Market makers are not concerned by the ban within the scope of their activities undertaken by contract to perform binding buy and sell orders (no. 2 of the Decree of 19 September 2008). This applies both to stock exchanges and to futures exchanges (including, among others, Eurex, Scoach, Euwax). Consequently, this also includes designated sponsors, qualified liquidity providers, ATP program participants and similar.
7. Which transactions are also not covered by the ban?
So-called Aufgabegeschäfte by so-called Skontroführer within the meaning of section 95 of the German Commercial Code (Handelsgesetzbuch – HGB) as well as fixed-price transactions as defined by the General Decree of 21 September 2008.
8. Which financial instruments are covered by the General Decree?
Only shares in the companies specified in the General Decree are covered:
AAREAL BANK AG
ALLIANZ SE
AMB GENERALI HOLDING AG
COMMERZBANK AG
DEUTSCHE BANK AG
DEUTSCHE BÖRSE AG
DEUTSCHE POSTBANK AG
HANNOVER RÜCKVERSICHERUNG AG
HYPO REAL ESTATE HOLDING AG
MLP MLP AGAG
MÜNCHENER RÜCKVERSICHERUNGS-GESELLSCHAFT AG
9. For which transactions do the General Decrees result in restrictions?
New issues of put instruments (put warrants, put certificates) as of 20 September 2008 (0:00 hrs.) may no longer be hedged by a short position in shares. This applies in the same way to the conclusion of CfDs to the extent these are hedged by transactions resulting in a net short position in shares. If the buyer, from an economic viewpoint, removes components from a basket product by means of a short sale, this is also no longer permissible to the extent that such components are the shares specified in the General Decree of 19 September 2008. This applies for index products, too.
10. Do transactions on Eurex fall under the scope of application of the General Decrees? Are hedging transactions on stock exchanges for the purpose of hedging Eurex transactions in options or single stock futures permissible?
In principle, transactions on the Eurex continue to be permissible. However, hedging a short put by an uncovered short sale of shares (naked short) would not be permissible. By contrast, it would be possible to hedge the short put by the sale of a future.
11. Are short share positions created by the exercise of option transactions subject to the ban of the Decrees?
No. Although the sale of a call option (short call) is a transaction, it does not yet result in a short position in shares. The short position arises only when the call option is exercised. Only at this point of time a delivery obligation arises with the option writer. He then has to settle this obligation.
12. May positions within one company be netted?
Yes, a netting of long and short positions within one company with reference to one of the stocks specified is possible.
13. Is there any grandfathering provision for positions established already before 20 September 2008?
Yes, positions existing before 20 September 2008 are not covered by the ban.
14. Is there any obligation for banks to monitor compliance with the ban by their customers?
There is no additional obligation for the banks to monitor compliance with the ban. This is without prejudice to the duty to report suspicious transactions pursuant to section 10 (1) of the Securities Trading Act (Wertpapierhandelsgesetz – WpHG). BaFin recommends banks to draw their customers’ attention to the General Decrees.
15. How long will the ban continue to apply based on the Decree of 30 March 2009?
The ban applies until 31 January 2010. The ban may be lifted early as well as extended once again.
16. Does the extension involve any substantive changes?
No, the substantive provisions of the Decrees dated 19 September and 21 September 2008 remain unchanged.
17. Why were the provisions of the General Decrees extended?
The undesirable developments existing at the time the General Decrees from September were issued which jeopardise the proper execution of securities trading and the stability of the financial system continue to exist. The ban additionally serves to prevent market manipulation in the stocks specified.
Note: These FAQs are continuously updated by BaFin.