German regulator announces short selling disclosure rules

The Federal Financial Supervisory Authority (BaFin), the German finance regulator, has announced a new reporting system for the short selling of 10 financial stocks, in an effort intended to boost transparency in the markets.

Under the new rule, which comes into effect on 25^th March and lasts until 31^st January 2011, investors must inform BaFin of net short-selling positions of a threshold of 0.2% or more and publish these positions at a threshold of 0.5% or above.

Banks covered by the new rule include Commerzbank, Deutsche Bank and Deutsche Borse.

The move from BaFin comes just one month after the watchdog lifted its ban on the uncovered short selling of 11 financial stocks, many of which are included in the new disclosure rule. The short selling ban had been in place since September 2008.

However, BaFin’s move is unlikely to come as a surprise, with regulators around the world continuing to eye short selling with suspicion. Earlier this week, the Committee of European Securities Regulators called for a pan-European short selling disclosure system, and outlined a two-tier proposal similar to the BaFin model.

Additionally, the German market may soon face even more stringent short selling requirements. The country’s finance minister, Wolfgang Schaeuble, has outlined plans to introduce a ban on unsecured short selling as well as further regulations on standard short selling.