U.K. – FCA New Short Selling Regime

• FCA issued consultation seeking views on proposals for a new short selling regime.
• Proposals aim to support growth by removing unnecessary barriers which might inhibit or discourage short selling while retaining sufficient visibility and controls over short selling to manage any risks to support orderly and effective financial markets.
• FCA updated guidance page on notification of net short positions to note consultation.
• Follows UK FCA February 2025 updated on the Short Selling Regulations 2025.

Background

• UK Short Selling Regulation (UK SSR) is assimilated law, forms basis of current regime.
• The Financial Services and Markets Act 2023 (FSMA 2023) sets out the legal framework for repealing and replacing assimilated law, as part of this, UK Treasury has established a new legislative framework for regulation of short selling.
• This gives FCA powers to create new firm-facing rules, replicate its emergency powers.
• This concluded that it was not necessary to fundamentally change current regime, but it should be modified to alleviate disproportionate burdens on firms that may inhibit or discourage short selling and its associated benefits, to create a more efficient regime.

Consultation

• CP25/29 Changes to the UK Short Selling Regime sets out proposed rules and guidance for short selling, draft Statement of Policy on emergency powers, draft instrument.
• FCA proposes to create a new Short Selling Rules Sourcebook (SSR), will largely replicate requirements under existing regime, alongside related European guidance.
• Plus some modifications to rebalance risks, reduce disproportionate regulatory burden.

Proposals

• The proposed changes affect: position reporting, to extend deadline by which persons are required to notify a change in their net short positions (NSPs) to 23:59 T+1.
• With additional guidance on calculation of NSPs, approach to reporting within groups.
• Covering, minor change proposed to ensure that records demonstrating appropriate covering agreements/arrangements held by persons short selling for minimum 5 years.
• Reportable shares list, The Short Selling Regulations 2025 require FCA to publish list of admitted shares to which its rules apply, this will replace current list of admitted shares that are exempt from its rules, proposes to expand criteria for which shares reported.
• And wishes to change date on which it updates list every 2 years from Jan. 1 to Apr. 1.
• Market maker exemptions, proposes to simplify notification process, reduce period of time, before using exemption, that market makers are required to submit exemptions.
• Public disclosure, the Short Selling Regulations require FCA to combine and publish the NSPs reported to it as aggregate NSPs (ANSPs) in relation to each company.
• NSPs reported by individual position holders will be anonymized; FCA proposes new guidance detailing how it calculates, publishes, updates, corrects list of ANSPs.

Related Changes

• Will make consequential changes to various areas of FCA Handbook, and proposes waiver provisions enabling application for waiver from position reporting requirements.
• Proposes to update operational arrangements for receipt and handling of position reports and market maker exemption notifications, to improve efficiency of processes.
• FCA proposes to maintain its current approach to using its emergency powers, for which it sets a higher bar, draft Statement of Policy on this is included in the CP.

Effectiveness

• The closing date for the submission of feedback to the consultation is 16 December 2025.