The Financial Conduct Authority (FCA) has finalised a simpler and less burdensome short-selling regime for the UK, reducing administrative hurdles for hedge funds, asset managers, and other investors.
Announced on Thursday (16 April) the changes form part of the UK’s post-Brexit push to streamline financial regulations through the government’s “repeal and replace” program. The new rules take effect on July 13, 2026, giving firms time to adjust systems and processes.
Key changes
Under the previous EU-derived regime, investors had to notify the FCA of net short positions in UK-listed shares once they reached 0.2% of issued share capital, with further notifications at every 0.1% increment. Positions at or above 0.5% triggered public disclosure of the individual short seller’s identity.
The updated framework shifts to aggregated, anonymised disclosures. The FCA will now publish only combined net short position data for each company, without naming specific firms. This reduces the risk of public “naming and shaming” that some short sellers argued could deter legitimate activity or invite activist backlash.
Reporting timelines have also been made more practical. Firms will get extra time to calculate and submit short position reports, easing operational pressure, especially for those managing complex, multi-jurisdictional portfolios.
Market makers benefit from even greater simplification. Previously, eligible firms had to submit frequent notifications to claim exemptions from certain short-selling restrictions.
Now, they can replace those with a single annual confirmation, dramatically cutting paperwork while the FCA retains supervisory visibility.
A new dedicated Short Selling Sourcebook in the FCA Handbook will consolidate rules that were previously scattered, providing clearer guidance for compliance teams.
Why the FCA is making these changes
Short selling plays a valuable role in efficient markets: it aids price discovery, improves liquidity, and allows investors to hedge risks or express bearish views.
Jon Relleen, the FCA’s director of infrastructure and exchanges, framed the reforms as smarter regulation in action. “These changes give firms clearer rules and cut administrative burdens, while ensuring we have the information we need to keep the market fair,” he said.
The moves align with broader UK efforts to cut red tape and make London more competitive internationally after leaving the EU. Regulators have emphasised maintaining prohibitions on uncovered (naked) short selling and keeping robust safeguards against market abuse.
Industry reactions during the consultation phase suggested many firms viewed the tweaks as helpful but not revolutionary, around two-thirds of attendees at an FCA event indicated the changes would not have a major operational impact on their businesses.
Still, the combination of anonymised data, longer reporting windows, and streamlined exemptions should meaningfully reduce compliance costs, particularly for active short sellers and liquidity providers.
For hedge funds and proprietary trading desks, the reforms lower the friction of building or adjusting short positions. Reduced public naming could encourage more candid expression of negative views on overvalued stocks, potentially sharpening price efficiency.
Market makers, who often hold short positions as part of their role in providing liquidity, also stand to save significant administrative effort.
Leave a Reply