The UK Financial Conduct Authority (FCA) set out its proposed rules and guidance for short selling activity changes that will affect the following areas:
- Position Reporting – propose to extend the deadline by which persons are required to notify a change in their net short positions (NSPs) to 23:59 T+1. Also, additional guidance on the calculation of NSPs to detail how persons can determine a company’s issued share capital and when they need to calculate the NSP and clarification of the approach to reporting within groups.
- Covering – propose a minor change to ensure that records demonstrating appropriate covering agreements and arrangements are held, by persons short selling, for a minimum of 5 years.
- The Reportable Shares List – The Short Selling Regulations 2025 (SSR 2025) requires the FCA to publish a list of admitted shares to which its rules apply (the reportable shares list). This will replace the current list of admitted shares which are exempt from those rules. Propose to expand the criteria used to determine which shares should be subject to reporting and covering requirements, reducing the number of shares on the reportable shares list (RSL). In addition, propose to change the date on which the FCA updates the RSL, every 2 years, from 1 January to 1 April. This will align with the publication of the EU’s list under the EU Short Selling Regulation (EU SSR), and provide a window to review and determine the shares on the RSL following the end of the calculation period on 31 December.
- Market Maker Exemptions – propose to simplify the notification process and reduce the period of time, prior to using the exemption, that market makers are required to submit notifications. Propose to change the content of notifications. This will enable market makers to utilize exemptions more quickly and easily to support their activities.
- Public Disclosure – the SSR 2025 requires the regulator to combine and publish the NSPs reported as aggregate net short positions (ANSPs) in relation to each company. NSPs reported by individual position holders will be anonymized. Propose to issue new guidance detailing how the FCA calculates, publishes, updates, and corrects the list of ANSPs disclosed.
“The planned lighter disclosure regime will bring Britain more in line with the US, which only discloses short positions in aggregate without revealing the identity of those holding them,” the FCA wrote in the consultation paper.
Patrick Sarch, partner and head of UK Public M&A at global law firm White & Case, said in emailed commentary: “These proposed changes come just as we are predicting an increase in short selling activity across the London market. The reforms are unlikely to have a material impact on that uptick in activity as 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.”
Tom Matthews, partner and head of White & Case’s EMEA Activism practice, said in emailed commentary: “The rule change will no longer require mandatory public disclosure of short positions, but (as in the US) it will not preclude voluntary public disclosure. 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.”