On 28 January the competent authority for supervising securities in Greece, the Hellenic Capital Market Commission (HCMC), made use of its powers of intervention in exceptional circumstances and decided to introduce yet another emergency measure under Article 20 of Regulation No 236/2012, also known as the EU Short Selling Regulation. As defined in the Regulation, short selling consists in the sale of securities that the seller does not own, with the intention of buying back an identical security at a later point in time in order to be able to deliver the security.

In a new act of a prolonged saga of short-selling bans originating as early as April 2010, the Commission announced in its press release 1/637/28.1.2013 its decision to temporarily prohibit the short selling in relation to shares of credit institutions admitted to trading on the Athens Stock Exchange and comprising the FTSE/ATHEX-CSE Banking Index, and in specific the shares of the following institutions: ALPHA ΒΑΝΚ,  ATTICA BANK Α.Τ.Ε., CYPRUS POPULAR BANK, ETHNIKI BANK, BANK OF CYPRUS, PEIRAIOS BANK and EUROBANK ERGASIAS.  The temporary short selling prohibition applies to all depository receipts representing shares of the above mentioned credit institutions, and covers both “covered” short selling (i.e. where the seller has borrowed the security before the time of the sale) and “naked” or “uncovered” short selling (i.e. where the seller has not borrowed the security at the time of the sale, or ensured that it can be borrowed).

In its press release, the Commission states that, in reaching this decision, it took into account the on-going process of recapitalization of credit institutions, as well as the recent macroeconomic developments in Greece.

In its relevant Opinion, the European Securities and Markets Authority (ESMA) considers the adverse developments relating to the Greek banking sector as constituting “a serious threat to financial stability and to market confidence in Greece”.  ESMA deemed the emergency measure as both appropriate and proportionate in relation to this threat, and considered the duration of the measure as justified.

The emergency measure will be introduced for a period of three months starting on February 1.  It remains to be seen whether the Commission will deem it appropriate to lift the ban earlier than that or decide to extend it, as it has done in the case of other short selling bans in the past.