Even if the bans on shorting financials introduced on Wall Street, in London and elsewhere actually worked, it seems curious that Japan would only introduce its own anti-bear-raid sanctions once its premier index, the Nikkei 225, had fallen 40 per cent in the space of four months.
No matter. Japan’s Financial Services Agency actually gave two weeks notice that the ban would be introduced, but there’s been precious little detail on the specifics since then.
So this may help – a note from UBS Japan to clients:
November 7, 2008
Dear Clients, UBS Securities Japan
Summary of New Reporting Obligations
New Short Sale restriction has been announced and 0.25% disclosure rule in effect as of November 7th, 2008. Here is a brief summary of the 0.25% reporting rule.
This is a temporary measure until end of this fiscal year (March ’09) which requires an entity with certain short positions to report through a broker to the exchange where the trades were executed and to be disclosed by the exchange. There is no Q&A published by the regulator as of 8am on November 7, 2008, therefore, we would like to present our understanding at this point. Please note that UBS does not have any intention to provide legal advice to clients. Please use this summary as your reference and consult with your legal counsel for any details only
① Effective Date: From 7th November ’08 till 31st March ‘09
② Scope of Securities for Reporting: All listed stocks on Japanese Exchanges
③ When is reporting required?
a) When the short position of a stock becomes more than 0.25% (including 0.25%) of the total outstanding shares due to such new short sale, AND, more than 50 lots
b) When there is a movement in the short position balance with an ending balance of above 0.25% and 50 lots
c) When the particular short position become less than 0.25% of total outstanding share OR less than 50 lots
Note 1: Only non-exempted short sell position is in of scope of this reporting requirement. We believe if it is difficult to identify the non-exempted short sell positions, a conservative approach of reporting whole Short Sell positions is also acceptable for this reporting requirement.
Note 2: Even though there is no short sell exempted short selling added to the November 6, ’08 short position balance, it is possible due to the change in number of total outstanding shares of the stock or from a buy back of the stock that the short position percentage (or number of lots) can change after November 7, 2008. First movement in the short sell percentage or lots post November 7, ’08 may result in more than 0.25% and 50 lots and is in scope of this reporting requirement as indicated above in b). In the case of any movement resulting in pushing the percentage to under 0.25% (or below 50 lots), we believe there is no obligation for reporting at this moment.
Note 3: For margin trades (shinyo torihiki), these are exempted from the Locate Indication/Confirmation Requirement, however, as for this reporting requirement, it is in scope and needs to be included in the new reporting scheme.
④ Content of Report （For Investment Manager）: “Name and Address of the Investment Manager” and “Position Information (: Name and address of Investment Manager as a Short Seller, name of Trust Asset / Name of Investment Advisory Counterpart / Name of the Fund, Security Name, “Calculation Date” of Short Sell Percentage, Short Sell Quantity and lots, Short Sell Percentage)”.
Please see two sample reports below corresponding to the “Names and Address” and “Position Information” report requirement samples.
Note 4: In the case of Investment Manager, in addition to the Investment Manager’s name (as a short seller), fund names etc. must be included in the reporting. Also, percentage calculation is also based on such Fund level etc.
Note 5: As for reporting requirements for overseas hedge fund managers who are not registered as an Investment Manager in Japan, it is expected that the same requirements can be applicable as all Investment Managers registered in Japan. However, there will be various calculation methods depending on the investment scheme and appropriate percentage calculation may differ by each Hedge Fund Manager. We recommend you consult with your legal counsel to determine the appropriate percentage calculation method.
⑤ Reporting Timing and Format: Report needs to be sent to a broker (when traded with multiple brokers, any one of those broker) by 10am (Tokyo Time) on T+2 of when there was a movement in the Short Sell balance resulting from none exempted short sell. When the broker receives such reports, they will be uploaded in a PDF format to the Exchange web-sites or forwarded by e-mail for upload to the Exchange web-sites. When overseas investor short sells on the market, (for e.g., overseas investor -> overseas broker -> domestic broker -> TSE) the overseas investor is required to abide by this reporting requirement as well and the overseas broker has an obligation to pass the overseas investor’s report to a domestic broker for uploading (or forward by e-mail) to the Exchange…