Europe: UK Reform of Short Selling Regime–FCA Consultation
By: Andrew Massey, Kai Zhang, and Ron Feldman
The Financial Conduct Authority (FCA) is consulting on changes to the short selling regime in the United Kingdom (UK), as set out in Consultation Paper CP25/29.
The proposed regime will not be fundamentally different to the current regime, but there will be some changes. The UK short selling regime will continue to apply to shares listed on a UK trading venue, but UK sovereign debt and CDS will be removed from the regime. The UK regime will continue to have extraterritorial effect, applying to a person anywhere in the world and regardless of whether the short selling activity is on or outside a trading venue.
Other features of the proposed regime include the following:
- Anonymised, aggregated disclosure of net short positions (NSPs): The requirement for a person to publicly disclose individual short positions would be removed. Instead, short sellers would need to notify the FCA of NSPs of 0.2% or more in an issuer, with the FCA publishing the aggregated short positions in an issuer without identifying the individual short sellers.
- Definitive reportable shares list: The FCA would maintain a single definitive list of all shares within scope of the regime (in place of the current listed shares and exempt shares lists). The FCA plans to make the list machine-readable so that firms may easily integrate it into their systems.
- Notification timing: The deadline for NSP notifications would be extended from 15:30 to 23:59 on the working day following the trading day.
The current UK regime is based on the EU regulation on short selling, which was retained in UK law following Brexit. The changes proposed by the FCA, if implemented, would lead to divergence between the EU and UK regimes. Whilst divergent requirements add operational complexity, the proposed changes to the UK regime have the potential to reduce the compliance burden, which is welcome.