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Japanese short selling restrictions extended by regulator

Posted 27 April 2010 - 11:01am by Craig McGlashan

The Japanese Financial Services Authority (FSA) has extended a set of temporary restrictions on short selling until the end of July 2010.

In the wake of the crisis in October 2008, the FSA prohibited naked short selling while in November of that year holders of a short position of at least 0.25% of outstanding issued stocks were required to report to exchanges through securities firms, with exchanges then required to publicly disclose this information.

The temporary ban was periodically extended until 30th April 2010, but now the date has again been moved, this time to the end of July.

Before the crisis, short sellers in Japan were required to mark transactions which were short sells and the market featured an “uptick rule requirement” where short sales were prohibited “in principle at prices no higher than the latest market price announced by the stock exchange concerned”. Also, exchanges were required to disclose the aggregate price of short selling of all securities on a monthly basis.

However, in October 2008, the FSA asked exchanges to disclose information on a daily basis, and required the reporting of both the aggregate price of all short selling and the aggregate price by sector.

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The Japanese Financial Services Authority (FSA) has extended a set of temporary restrictions on short selling until the end of July 2010.

In the wake of the crisis in October 2008, the FSA prohibited naked short selling while in November of that year holders of a short position of at least 0.25% of outstanding issued stocks were required to report to exchanges through securities firms, with exchanges then required to publicly disclose this information.

The temporary ban was periodically extended until 30th April 2010, but now the date has again been moved, this time to the end of July.

Before the crisis, short sellers in Japan were required to mark transactions which were short sells and the market featured an “uptick rule requirement” where short sales were prohibited “in principle at prices no higher than the latest market price announced by the stock exchange concerned”. Also, exchanges were required to disclose the aggregate price of short selling of all securities on a monthly basis.

However, in October 2008, the FSA asked exchanges to disclose information on a daily basis, and required the reporting of both the aggregate price of all short selling and the aggregate price by sector.