The European Securities Markets Authority (ESMA) agreed to the proposal of the Hellenic Capital Market Commission (HMCM) to impose a seven-day emergency short-selling ban on Greek companies. The HMCM made its proposal under the Short Selling Regulation.
The ESMA implemented the short-selling ban on June 30 until July 6, 2015. The European markets regulator temporarily prohibited transactions that create, or increase net short positions in any of the shares admitted to trading on the Athens Exchange and Multilateral Trading Facility.
According to the ESMA, adverse developments occurred in Greece, which constitute a serious threat to the confidence in the Greek market. “The proposed measure is appropriate and proportionate” to address the threats.
Greek regulator imposed fines against short-selling hedge funds
The Greek market regulator imposed fines on a group of hedge funds London that are betting against banking sector of Greece. The HCMC argued that the hedge funds’ “naked short-selling” practices on the shares of Greek banks violated pan-European rules.
Some of the hedge funds penalized by the HCMC include George Soros’ Quantum Fund and Martin Hughes’ Tosca Fund among others. According to the Financial Times, the hedge funds were ordered a combined penalty of €1 million, still unpaid.
“The Greeks are shooting themselves in the foot.All these hedge funds have been helping to recapitalize the Greek banks at a time when no one else would touch them,” according to one of the executives of the hedge funds.
The hedge funds through the Alternative Investment Management Association presented their argument to the ESMA and requested the pan-European markets regulator to pressure Greece into conceding the fines.
The hedge funds argued that the Greek regulator was overly strict regarding short-selling restriction and inconsistent compared with other market regulation in the European region.
Greece needs €60 billion extra funds
Greece failed to repay the €1.5 billion due to the International Monetary Fund (IMF) on June 30. The international creditor declared Greece in arrears. The country can only receive IMF financing once the arrears are cleared. The Greek government requested an extension to repay its obligation.
Greece needs as much as €50 billion in new financing from October 15 until the end of 2018, according to the preliminary draft debt-sustainability analysis released by the IMF on Thursday.
“It is assumed that it could take until September for the Greek authorities to complete the prior actions and for the necessary assurances on financing and debt sustainability to be in place. Financing needs until then could be met from already committed European funds, including the temporary use of about €6 billion of the HFSF buffer. The 12-month forward financing requirements from October 2015 onward amount to about €29 billion,” according to the IMF report.