UK government introduces new short selling regulations
15 January 2025 UK
Image: William/stock.adobe.com
The UK government has published the Short Selling Regulations 2025, which gives the Financial Conduct Authority (FCA) rulemaking powers related to short selling activities and the power to intervene in exceptional circumstances.
This legislation replaces assimilated law related to short selling, following a review of the EU-inherited Short Selling Regulation (SSR) by the Treasury, launched in December 2022.
In an explanatory memorandum, published alongside the legislation, the Treasury says: 鈥淭he instrument maintains an overarching regulatory framework to facilitate short selling and the benefits it provides to the orderly and effective functioning of the markets, while protecting against risks.鈥�
In the new model, the FCA sets the detailed rules that firms must follow, within a framework set by the government, such as restrictions on uncovered short selling.
鈥淭hrough the FCA taking on additional rulemaking responsibilities, financial services firms and consumers will benefit from agile, tailored rule-making that suits UK markets,鈥� says the Treasury.
Participants must also notify the FCA of net short positions above 0.2 per cent of issued share capital, and the FCA then publishes anonymised aggregated net short positions based on all individual notifications it receives.
This is a change from the former SSR where firms were required to publish individual net short positions above 0.5 per cent of issued share capital.
The legislation applies to all businesses that engage in short selling, including small or micro businesses.
The Treasury estimates that the net impact of this instrument on business will be less than 拢10 million equivalent annual net direct cost to business (EANDCB).
The new regulations came into force on 14 January, except for certain provisions that will commence on 14 February to allow the FCA to provide guidance or issue policy statements.
This legislation replaces assimilated law related to short selling, following a review of the EU-inherited Short Selling Regulation (SSR) by the Treasury, launched in December 2022.
In an explanatory memorandum, published alongside the legislation, the Treasury says: 鈥淭he instrument maintains an overarching regulatory framework to facilitate short selling and the benefits it provides to the orderly and effective functioning of the markets, while protecting against risks.鈥�
In the new model, the FCA sets the detailed rules that firms must follow, within a framework set by the government, such as restrictions on uncovered short selling.
鈥淭hrough the FCA taking on additional rulemaking responsibilities, financial services firms and consumers will benefit from agile, tailored rule-making that suits UK markets,鈥� says the Treasury.
Participants must also notify the FCA of net short positions above 0.2 per cent of issued share capital, and the FCA then publishes anonymised aggregated net short positions based on all individual notifications it receives.
This is a change from the former SSR where firms were required to publish individual net short positions above 0.5 per cent of issued share capital.
The legislation applies to all businesses that engage in short selling, including small or micro businesses.
The Treasury estimates that the net impact of this instrument on business will be less than 拢10 million equivalent annual net direct cost to business (EANDCB).
The new regulations came into force on 14 January, except for certain provisions that will commence on 14 February to allow the FCA to provide guidance or issue policy statements.
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