The Dutch regulator, AFM discloses George Soros short positions and other international hedge funds by accident. These details are sensitive for hedge funds. What are there consequences of AFM's error?
26 January, AtoZForex – The Dutch Authority for the Financial Markets (AFM), mistakenly released the details of previously private short selling trades by international hedge funds. The list included bets against Dutch banks by George Soros and the positions of Renaissance Technologies’ Medallion fund.
Following the financial crisis, Europe’s regulators introduced rules ordering hedge funds to report their short positions to regulators. However, the hedge fund has to make public only those short positions that are larger than 0.5 percent of a company’s outstanding shares.
AFM mistakenly publishes a list of short trades
On Tuesday, the regulator published the details of hedge funds' short trades dating back to 2012. But shortly after it erased those details. The AFM made a mistake as it published details of all short trades. Following this case, AtoZ Forex has reached out to the AFM. After speaking with Ward Snijders, Senior Communications Manager and Media Relations at AFM, the following statement was provided to us:
"On the afternoon of Tuesday 24 January, after the close of the market, the AFM unintentionally published a list on its website that included net short positions of less than 0.5% instead of publishing the daily list of net short positions of 0.5% and higher. The AFM corrected this mistake and posted the correct list of net short positions of 0.5% and higher on the morning of Wednesday, 25 January. We regret this error.
The net short positions register concerns the notifications of significant net short positions in shares as required under the EU Regulation on Short Selling and certain aspects of credit default swaps. A natural or legal person holding a net short position of 0.2% or higher in the issued capital of a company whose shares are admitted to trading on a trading platform must report this position to the AFM. The AFM publishes notifications of short positions of 0.5% or higher on its website on a daily basis."
Consequences of AFM's error
The consequences are far stretched for the hedge funds. Due to the fact that they usually protect the details of their short trades, as they are sensitive data. Some even intentionally keep position below the 0.5 percent to refrain from making this information public. In order to avoid rivals viewing their positions. As the AFM discloses George Soros short positions and that of other international hedge funds by mistake, many have aired their negative comments. In one case, a hedge fund commented that:
"When a bank or hedge fund makes a mistake they are fined — who will fine the Dutch regulator?"
Many hedge funds do not want to reveal themselves to the management teams of the firms they are betting against. Or the hedge fund is simply private. Such as in the case of the Medallion fund, which is operated by the Renaissance Technologies. Being a private entity, the fund only manages the fortunes of the Renaissance partners. Hence, after AFM's mistake it is now publicly known that the Medallion fund has bet against small Amsterdam-listed companies since 2012.
AFM discloses George Soros short positions
Not only got the short positions of the private hedge fund Medallion fund made public, but also that of George Soros. According to the details of the AFM, the Soros Fund Management has bet against the Dutch bank ING. Moreover, AFM discloses George Soros short positions were opened in June and was raised to 0.3 percent of the lender’s shares.
Despite, these sensitive data was published accidentally. It does not fully reveal the strategy of a hedge fund without having information about its whole portfolio. Considering that hedge funds sometimes use short positions to hedge against other trades.
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