Back in May, at the peak of the European sovereign debt crisis, the Spanish stock market regulator announced it would ramp up rules on the disclosure of short positions on Spanish stocks from June onwards.
As the FT reported at the time (our emphasis):
Spain’s stock market regulator is to toughen controls of equity short selling with plans to extend current reporting rules beyond financial sector stocks.
The National Stock Market Commission (CNMV) said late on Thursday that hedge funds and other short sellers would have to inform the regulator of positions of more than 0.2 per cent of total capital in all listed companies after June 10 this year.
Positions above 0.5 per cent will have to be communicated to the public via the CNMV website. At present, only short positions of more than 0.25 per cent in financial sector stocks must be communicated to the public, a rule that was introduced to curb speculative trading amid the market turmoil following the collapse of investment bank Lehman Brothers in September 2008.
Since that time, there’s been an interesting switchover in the trading style of single stock futures on Eurex.
As can be seen, back in May, Eurex’s data showed that German equity futures (incidentally, another prominently short-controlled market nowadays) were by far and large the most traded single stock futures on Eurex:
Fast forward to Eurex’s August data and the proportions have changed to make Spanish single stock futures the most actively traded:
But it’s not all Spanish stocks that are being so actively being traded.
If you look the exchanges top 10 list of most traded products, you’ll see that one particular future outshines all others (albeit in the environment of generally falling trading activity since May/June at Eurex):
A comparison of single stock future activity in the European banking sector from May to August, meanwhile, shows up to what degree investors are still sticking to futures to trade Santander above and beyond all others:
Now, Eurex single stock futures are hardly a sizeable market. What’s more, trading has diminished significantly since May.
But the point is that investors are clearly becoming ever more creative when it comes to overcoming restrictions placed in more conventional shorting and trading markets.
Of course, this particular futures market has been growing for a while already. Eurex reported a 196 per cent increase in the number of single-stock futures traded on its exchange way back in the first five months of 2008, for example. Here, meanwhile, is the overall trend in single stock futures trading this year:
It’s worth pointing out that the above trend comes amidst a general fallback in conventional Spanish equity shorting since June.
Here, at least, are the latest short-selling disclosures to have been filed to the Spanish regulator:
Related links:
Athens is open for short selling – FT Alphaville
Greek SEC watchdog bans short-selling in stocks - Reuters
Spain to toughen short selling rules – FT