The Danish ban on short selling was imposed by Executive Order No. 1004 of 10 October 2008 on short selling. The ban was introduced in the context of the general government guarantee (Bank Package 1) to ensure financial stability, reduce the stock market turbulence and avoid short-term speculation in price declines that may have a cumulative effect.

Ban on naked short selling

The Regulation introduces a ban on naked short selling of shares and sovereign debt, as naked short selling sometimes has been thought to increase the potential risk of non-settlement and volatility. To address these risks the Regulation introduces certain requirements that a short seller must adhere to before a sale is completed, the requirements are imposed in order to ensure the share or the government bond will be available when has to be delivered.

Transparency

The Regulation also introduces greater transparency for regulators and the market on short selling of shares.

For shares, the Regulation introduces a requirement that short positions of more than 0.2% of the issued share capital of a company admitted to trading on a regulated market or a multilateral trading facility for equities listed in Denmark must be reported to the Danish FSA. All subsequent changes of 0.1% must then be submitted to the Danish FSA until the short position falls below 0.2%.

For shares, there is an additional requirement, that short positions of 0.5% of the issued share capital and all subsequent changes of 0.1% until the short position falls below 0.5% must be disclosed to the market the published short positions will be available via
databse of company announcements

Short positions in sovereign debt issued by the Danish government must be notified to the Danish FSA when the short position passes a relevant notification threshold. For Denmark, the relevant notification threshold is set at 0.50% of the outstanding debt and all subsequent 0.25% thereafter.

The Regulation also contains a number of other provisions including the possibility of introducing special procedures in case of market turmoil. For more on the regulation refer to theme page on short-selling here

For questions regarding short selling regulation, please contact Claus Ditlev Poulsen or Kirstine Brink. See contact information in the boxes to the right.