The EU SSR regulation establishes the short-selling reporting regime in Europe. As part of the short-selling regime, an exempt list for securities has been mandated. The purpose of the EU SSR ESMA Exempt List is to exempt from reporting, a set of securities which the list determines to have a principal trading venue outside the EU. FundApps automatically scrapes the Exempt List and incorporates it into our Regulatory Data, which is then used in rules.

This article covers three things:

The European Securities and Markets Authority (ESMA) is the entity which publishes the list.

The Regulation dictates that the Regulators themselves are responsible for keeping the list up to date. In practice, this occurs when the Regulators go to ESMA and update any relevant entries.

It is worth noting that the ESMA Exempt List is the only source by which a security can be determined to have a principal trading venue outside of the EU and, therefore, be out of the scope of the SSR regime.

It is understandable to take the regulator at their word when they reject a filing because the principal trading venue is outside the EU, meaning that a disclosure would not be required.

This is not the correct analysis, however. A regulator cannot reject a disclosure on this basis. According to the regulation (as mentioned on this page of the ESMA site), the only determinant of whether a stock has a principal trading venue outside the EU is the ESMA Exempt list. The relevant passage is included here:

Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March on short selling and certain aspects of credit default swaps (the Regulation) requires the relevant competent authorities to identify shares having their principal trading venue located in a third country. Under Article 16(2) of the Regulation, the relevant competent authorities notify ESMA of such shares. On the basis of these notifications, ESMA publishes the compiled list of exempted shares to which provisions of the Regulation relating to net short position transparency (Articles 5 and 6), to the restriction of uncovered short sales (Article 12)

This means that the regulator cannot reject the disclosure unless they fulfil their regulatory obligation of updating the ESMA Exempt List.

Once a security has been placed on the ESMA Exempt List, it can only then be said that it has a principal trading venue outside the EU, and therefore, a disclosure would not be required.

Every 55 minutes past every third hour from 08:00 and 23:00 (including 23:55) in GMT, a service queries ESMA's API, using the example query for "Exempted Shares under Short Selling Legal Framework" found on ESMA's site. The date value we used in the query is the date of the crawl. Once we have the response, we filter out any entries which have the status "Not effective yet", to get a list of the exempt shares for that day. We consider an item to "go on" the list when it is first picked up by one of the scrapes and to "go off" the list when it no longer appears.

The Exempt List has a quirk in its default search function, which has resulted in some confusion in the past.

The Exempt List can be searched in two ways:

In this way, a default search can show results for security even though that security is not currently on the most up-to-date version of the Exempt List.

The User Guide to the Exempt List confirms this. Section 19 confirms that using the version date search is a snapshot of the data as of the given date.

Let us consider the example of Baozun, with ISIN US06684L1035.

A default search shows a number of historic entries on the list for this security.

However, a version date search shows that on the date of 2 March, this security was not on the Exempt List.