Shareholding Disclosure for EU TDA

Transparency Directive (TD) v.s. Transparency Directive Amended Directive (TDAD)

Horizontal Aggregation

Under the original TD, the concept of horizontal aggregation was introduced in some Member States as a gold plating to the rule, but under the TDA this became a requirement. This concept requires investors to monitor holdings in three different ‘buckets’:

• Equity Shares
• Financial Instruments (Financial Instruments + Financial Instruments with similar economic effect)
• An aggregate of the Equity Shares and Financial Instruments ‘buckets’ 

Disclosures are required if any one of these buckets breaches a threshold. Previously, they were calculated separately.

Disclosure of Vertical Aggregation

Calculations of holdings need to be done at the top level of a corporate structure to see if any thresholds have been crossed. The concept of Vertical Aggregation requires that investors perform the same calculations at each level in their corporate hierarchy should there be a requirement to disclose at their top level. The goal is to identify the entire chain of ownership within a corporate group.

A broader scope of disclosable financial instruments

Under the TDA financial instruments with similar economic effect were introduced and are now disclosable. These instruments were disclosable under gold-plating under the TD, but a requirement under the TDA. These instruments - like cash settled derivatives - will never give their holder access to the underlying shares, but instead, provide an economic effect that is similar to holding the corresponding shares or instruments that would give access to the underlying shares. 

In the context of Horizontal Aggregation, these instruments are treated as Financial Instruments. However, when calculating the equivalent shares, the calculation must be delta adjusted.