In accordance with Article 44(1) of Regulation (EC) No 1095/2010 the Board of Supervisors has adopted the following opinion:

1. Legal basis

According to Article 27(2) of Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps[1], the European Securities and Markets Authority (ESMA) shall within 24 hours of the notification made by a competent authority under Article 26 of that Regulation, issue an opinion on whether it considers the measure or proposed measure is necessary to address the exceptional circumstances.

2. Background
   1. In accordance with Article 26 of Regulation (EU) No 236/2012, CONSOB notified ESMA on 5 July 2016 of its intention to make use of its powers of intervention in exceptional circumstances and to introduce an emergency measure under Article 20(2)(b) of that Regulation.
   2. The concerned emergency measure consists of a ban on net short positions on Banca Monte dei Paschi di Siena spa (“BMPS” - ISIN IT0005092165) shares, either directly or through related instruments and irrespectively of the venue or market in which the transactions leading to those positions are conducted.
   3. The proposed measure will not apply to trading in index-related instruments.
   4. CONSOB has not exempted entities performing market making activities from the scope of the prohibition. CONSOB justifies the absence of an exemption for market makers on the fact that the definition of market makers is not convergent across different jurisdictions.
   5. The proposed measure is expected to enter into force on 7 July 2016 at 00:00:01 CET and to be applicable until 5 October 2016 at 24:00:00 CET.
   6. On 4 July 2016 BMPS published a press release whereby it informed the public of a draft regulatory request coming from the European Central Bank (“ECB”).
   7. In particular, the ECB has requested BMPS to reduce the amount of non-performing loans (“NPL”) by close to 15 billion euro by 2018 and provide the ECB, by 3 October 2016, with a credible plan outlining the measures to be taken by BMPS in order to reduce the NPL compared to the total loans (i.e. from an actual ratio NPL/total loans of 42% to a target ratio of 20% by 2018).
   8. BMPS should submit the above plan by Monday 3 October 2016.
   9. Following the publication of the press release, BMPS price fell by 13.99% in a single day (4 July 2016) in respect to the reference price of the day before. The drop in price continued, more intensely, the following day (-19.39% on 5 July 2016).

3. On the adverse events or developments
   10. ESMA considers that the circumstances described above are adverse events or developments which constitute a serious threat to market confidence in Italy.
   11. More specifically, it should be noted that the BMPS share price already fell by 26.29% in the period starting from 24 June to 1 July 2016, following the results of the UK referendum. Overall, the price of BMPS shares has fallen by 50% in the last thirteen days, and a substantial selling pressure and unusual volatility in the price of shares issued by BMPS could be reasonably expected as market uncertainty remains. Moreover, BMPS is among the Italian issuers with the highest net short position (roughly equal to 6% of the share capital as at 1 July 2016).
   12. As a result, and at least until the abovementioned BMPS plan to reduce the amount of non-performing loans has been submitted to the ECB, a threat to market confidence persists regarding BMPS shares. If an abrupt decline in the price of BMPS shares continues, there is a risk of contagion effect to other shares of the Italian banking sector.
   13. In this respect, it should be considered that the ECB has requested BMPS to reduce the amount of NPL by close to 15 billion euro by 2018 and that BMPS net equity, according to the Consolidated Report on Operations as at 31 December 2015, was close to 9.5 billion euro. Therefore, the realisation of the plan may require significant adjustment.
   14. The combination of large short positions, severe decline movements in price in the last weeks and the impact of the actions that the bank will need to undertake in view of the relevance of the required measures constitutes in ESMA´s view a clearly adverse scenario for the stability of the bank and, given its relative size, of the Italian banking sector.

4. On the appropriateness and proportionality of the measure
   15. ESMA considers that the emergency measure under Article 20(2)(b) of Regulation (EU) No 236/2012 in relation to BMPS shares is appropriate and proportionate to address the threat in the Italian financial markets.
   16. The measure is adequate to address the expected substantial selling pressures and the unusual volatility causing significant downward spirals in BMPS shares (adverse events and developments as indicated in letter c) of Article 24(1) of Commission Delegated Regulation (EU) No 918/2012), given that it limits the ability to enter into short positions, which may be a relevant factor behind the severe falls experienced in recent dates. In that sense, to the extent that the measure restricts the ability to adopt short positions, it may also indirectly reduce the risk of a contagion effect to other shares of the Italian banking sector.
   17. The measure is appropriate because it is the least stringent of all the measures that would sufficiently address the threat. A temporary restriction on short selling according to Article 23 of the Regulation (EU) No 236/2012 (which CONSOB also adopted on 5 July 2016) would not address the long period of risk as it may not be extended to the described period of three months. Similarly, a mere short sale prohibition would not cover activities through derivatives. Above that, a total ban including all products could have been considered, but CONSOB has decided to minimise possible detrimental effects on the efficiency of financial markets, and does not extend the restrictions to index-related instruments.
   18. As to the non-exemption for entities performing market making activities (market makers), ESMA notes that CONSOB considers that, given the broad dispersion of what is considered a market maker in different Member States, should the exemption be introduced, it would apply to a potentially very wide number of entities, affecting therefore the effectiveness of the prohibition. On the one hand, ESMA acknowledges that such a diversity exists and that the exemption for market makers could reach a wide number of entities compared to those that usually perform market making on a regular basis. On the other hand, ESMA considers that the non-application of the exemption to active market makers could dis-incentivise or make more complex the quoting of BMPS shares by market makers active in this specific share, which could detract additional liquidity from the market.

5. On the duration of the measure
   19. ESMA considers that the duration of the measure, although it consumes the maximum period envisaged in the Regulation and is therefore a long-lasting measure, is justified, given the intention of covering the deadline BMPS was given by the ECB to deliver the plan to reduce the amount of non-performing loans (3 October 2016).
   20. Besides, the measure may be lifted before the end of the established period if circumstances that justified the imposition of the measure improve. ESMA recommends CONSOB to monitor closely the situation and to consider lifting the measure before the initial deadline if the situation so permits, to ensure that the restrictions remain in place for the shortest possible time.

This opinion will be published on ESMA’s website.

Done at Paris, 6 July 2016

IT - La presente traduzione è stata fornita dal Centro di traduzione degli organismi dell’Unione europea.

OPINION Emergency measure by the Greek HCMC under Section 1 of Chapter V of Regulation No 236/2012 on short selling and certain aspects of credit default swaps I. Legal basis 1. According to Article 27(2) of Regulation (EU) No 236/2012 of the European Parliament and of the Council of 14 March 2012 on short selling and certain aspects of credit default swaps (the Regulation), the European Securities and Markets Authority (ESMA) shall within 24 hours of the notification having been made by a competent authority under Article 26 of the Regulation issue an opinion on whether it considers the measure or proposed measure necessary to address the exceptional circumstances. 2. ESMA’s competence to deliver an opinion is based on Article 29(1) (a) of Regulation (EC) No 1095/2010 (ESMA Regulation). In accordance with Article 44(1) of the ESMA Regulation the Board of Supervisors has adopted this opinion. II. Background 3. On the 29th of June 2015, ESMA issued an opinion on the emergency measure introduced by the Hellenic Capital Market Commission (HCMC) under Article 20 of the Regulation. The measure consisted of a temporary prohibition of transactions in any financial instrument that create, or increase, a net short position on any of the shares admitted to trading on the Athens Exchange and the Multilateral Trading Facility of “EN.A” (Alternative Market of the Athens Exchange) of which the relevant Competent Authority is HCMC and was applied from 30th June 2015 at 00.00.01 CET to the 6th July 2015 at 24:00:00 (CET). 4. The measure concerned the following financial instruments: all shares admitted to trading on the Athens Exchange and the Multilateral Trading Facility of “EN.A”, as well as all related instruments included in the calculation of the net short position in accordance with Regulation (EU) N0 236/2012 and Commission Regulation (EU) No 918/2012 of 5 July 2012 (see in particular Annex I, Part I thereof). It applied to any person irrespective of their country of residence, and did not envisage any exemption for market maker activities. 5. In the original notification to ESMA, the HCMC indicated that the measure was a complementary action to the ones already established on the 29th of June 2015 by the Greek Authorities, namely: • closure of the ATHEX regulated market and the Multilateral Trading Facility of “EN.A” until the 6th of July (included); • closure of the Electronic Secondary Market “HDAT” for government bonds operated for the same period; • suspension of redemption of mutual funds’ units; • suspension of operation of ATHEXClear for the securities traded on the Greek market and the MTF “EN.A”; • suspension of the settlement of securities traded on the Greek market by the Hellenic Central Securities Depository; • trading suspension of all the securities of listed companies covered by the above measures, as well as the related financial instruments (the trading suspension is effective also in other Member States). 6. The reason for proposing a temporary prohibition for the creation, or increase, of a net short position on the shares admitted to trading on the Athens Exchange and on “EN.A” was that the HCMC deemed it necessary for the protection of investors and the preservation of financial stability. In fact, such prohibition was considered a relevant component to ensure the effectiveness of the other measures adopted by the Greek authorities. The HCMC also stated that given that the main liquidity and trading activity on those instruments normally is located within the Hellenic Republic, the measure would have not created disproportionate negative effects, since it would have affected a fairly small part of the EU overall market. 7. On the 6th, the 13th, the 20th and the 27th of July and on the 3rd of August 2015, some of the measures described were renewed by the Greek authorities. On the same days, the HCMC notified ESMA and competent authorities of its intention to renew the short selling measure and ESMA issued in all cases a positive opinion concerning these renewals pursuant to Article 27 of the Regulation. 8. The renewals concerned the same financial instruments of the original measure (see paragraph 4), but the HCMC specified in the related notifications that although the ban covers all transactions in the financial instruments listed in Part I of Annex I of Commission Regulation (EU) No 918/2012, transactions in index-related instruments and ETFs are included to the extent that the shares admitted to trading on the Athens Exchange and the Multilateral Trading Facility of “EN.A” of which the relevant Competent Authority is the HCMC represent more than 5% of the total value (or composition) of these instruments. 9. The renewal notified on the 3rd of August entered into force at 00:00:01 hours (CET) on the 4th of August 2015 and expires at 24:00:00 (CET) on the 31st of August 2015. 10. On the 31st of August 2015, in accordance with Article 26 of the Regulation, the HCMC has notified ESMA and other competent authorities of its intention to make use of its powers of intervention in exceptional circumstances and to introduce an emergency measure under Article 20 of the Regulation which is however of a different nature than the one previously introduced and renewed five times which is expiring on the 31st of August. 11. The proposed measure consists in a ban on short selling of shares and units of Exchange Traded Funds (ETFs) admitted to trading on the Athens Exchange and the Multilateral Trading Facility of “EN.A” (Alternative Market of the Athens Exchange) of which the relevant Competent Authority is the HCMC. It will also concern all depository receipts (ADRs, GDRs) representing shares admitted to trading on the Athens Exchange and the Multilateral Trading Facility of “EN.A” (Alternative Market of the Athens Exchange). This ban would include sales which are covered with subsequent intraday purchases. 12. The proposed short selling measure would apply to any natural or legal person, irrespective of their country of residence, but would be subject to the exemption for market making activities, provided that short selling transactions are conducted for hedging purposes. 13. The measure shall apply for a period of thirty calendar days and shall be in force until 24:00:00 (CET) on the 30th of September 2015. 14. In the notification, the HCMC explains that despite the reopening of the Athens Exchange and the MTF “EN.A” on the 3rd of August after a period of more than one month, there are still conditions on the Greek capital market which prevent its smooth functioning: • the imposition of capital controls and the restrictions of transfers in the acquisition of financial instruments (i.e. restrictions on the buy side) for Greek investors based on Article 5 of Law. 3606/2007 (A 195) through regulated markets and multilateral trading facilities or professionals who have such financial instruments as UCITS; • the political developments namely the forthcoming parliamentary elections that will take place on the 20th of September 2015; • the forthcoming recapitalisation of the four Greek “systemic” credit institutions. 15. The reason for proposing a temporary ban on short selling is that the HCMC deemed it necessary for the protection of investors and the preservation of financial stability. In fact, such prohibition is considered by the HCMC a relevant component to ensure the effectiveness of the other measures adopted by the Greek authorities. The HCMC also stated that given that the main liquidity and trading activity on the instruments concerned by the measures normally is located within the Hellenic Republic, the measure would not create disproportionate negative effects, since it would have affected a fairly small part of the EU overall market. III. Opinion 16. ESMA is adopting the following opinion on the notified measure, on the basis of Article 27(2) of Regulation 236/2012 on Short selling and certain aspects of credit default swaps: On the adverse events or developments ESMA considers that adverse developments which constitute a serious threat to market confidence in the Greek market still persist. Comparing the current situation in the Hellenic Republic with related events over the past few years, the threat to financial stability and investor protection at least in the Hellenic Republic is obvious. Despite the partial reopening of credit institutions on 20 July 2015, and the reopening on 3 August 2015 of the ATHEX regulated market, the Multilateral Trading Facility of “EN.A”, and of the Electronic Secondary Market “HDAT” for government bonds, the situation of fragility in the financial system and in the Greek economy persists, as highlighted by the high volatility already experienced on the ATHEX in the course of the first days after reopening. However, ESMA considers that the severity of the market events is lower than in previous weeks. On the appropriateness and proportionality of the measure ESMA considers that the measure means in practice a partial lifting of the previous ban on short position, both in terms of the instruments covered and of the general restriction to operate on Greek underlyings. Therefore, ESMA considers that the measure is appropriate and proportionate to address the above mentioned threats that persist in the Greek financial markets. Short sales in shares and units of ETFs could still exacerbate the threats to financial stability, especially as regards the financial sector. However the new measure, with a smaller scope, is not restricting the activities of the derivative markets. In that respect, ESMA understands that the measure accompanies the gradual normalization of financial conditions in Greece. The exemption foreseen for market making activities is justified by the fact that market makers should be allowed to properly carry out their activity, thus enhancing the liquidity on the Greek shares and ETFs units, and contributing to the adequate functioning of Greek financial markets. On the duration of the measure ESMA considers that the duration of the measure is justified, taking into account that the capital controls are still in place, the on-going recapitilisation process and the electoral calendar. Under these circumstances, ESMA considers it is necessary and appropriate for HCMC to impose a short selling ban on shares and ETFs units that would last until the end of September, in view of supporting the proper functioning of the Greek financial markets in this transitional period. Besides, ESMA takes into consideration HCMC’s statement in its notification of intent that the measure may be lifted before the end of the established period or renewed in accordance with the provisions of Regulation (EU) No 236/2012 if circumstances that justified the imposition of the measure improve, persist or worsen.