The Financial Conduct Authority (FCA) is seeking feedback on its proposed short selling regime, which will anonymise reporting and, it says, encourage growth.
The FCA has overseen short selling regulation in the UK since 2023, when it was given rulemaking, supervisory and enforcement powers by the UK Treasury.
READ MORE: UK Government flips short selling powers to FCA in Brexit breakaway
The UK short selling regulation (SSR) was initially based on the EU framework, but now differs in a number of ways.
An initial call for evidence, completed in 2022, concluded that fundamental changes to the short selling regime were not required. However, a number of tweaks have been proposed to reduce the reporting burden on firms and remove potential barriers to short selling, while ensuring that the strategy is not overused.
In the updated regime, all individual net short positions reported above the 0.2% threshold would be combined, anonymised and disclosed. By contrast, the EU requires all short positions over 0.5% to be publicly reported, along with details of the transactions.
This aggregated reporting is in line with the 2025 Short Settling Regulations, a legislative framework published by the UK Government in January. Further guidance on how these aggregate net short positions are calculated, published and updated will be provided in due course.
Patrick Sarch, partner and head of UK public M&A at White & Case, commented, “There is no substantive change to what investors can do – it will simply mean there is less transparency regarding who is short of what.
“In fact, many investors don’t mind being named or actively prefer to be. The real impact will be on the issuers who will have less visibility on who is holding short positions in their stock and whether those positions are concentrated or spread across multiple investors.”
“Ultimately, these changes won’t make a material difference to the efficiency or attractiveness of the UK market. There will be slightly less compliance friction for short sellers and their intermediaries, but at the expense of transparency for issuers and other investors.”
Partners at AO Shearman disagree. In a January report, the law firm said of the anonymous reporting, “This is a welcome change, particularly for asset managers who for years have been concerned about copycat behavior, short squeezes and potentially revealing trading strategies. The changes are intended to encourage more trading activity and greater liquidity in U.K. markets.”
While public disclosures of short positions will no longer be mandated by regulation, voluntary disclosure may continue – as is seen in the US.
Tom Matthews, partners and head of EMEA activism at White & Case, noted, “We will therefore continue to see short selling “bear attacks” by specialist short selling hedge funds, who publish negative reports on a company in parallel with placing short bets on its stock.”
The SEC’s regulation SHO, which governs short selling, is currently under consideration after legal challenges.
Firms would also be given more time to submit their position reports under the FCA’s new rules, with a deadline of 23:59 T+1. The processing time for the regulator, and the time it takes to provide guidance on how firms should determine the issued share capital of companies in order to calculate their positions, will be reduced.
The list of shares bound by the rules will be updated, with the criteria for inclusion expanded.
The FCA additionally intends to automate and simplify its systems for the receipt of position reporting and market maker exemption notifications.
“Aggregated net short positions and simplified processes for reporting will enhance and streamline the short selling regime in the UK, reducing burdens for capital market participants while ensuring the market still gets the transparency it needs,” said Simon Walls, executive director of markets at the FCA.
“These proposed changes are another important milestone in our drive to become a smarter regulator and to support growth.”
Comments on the consultation paper will be accepted until 16 December.
