From EU legacy to UK innovation: FCA consults on short selling changes

The Financial Conduct Authority (FCA) has published Consultation Paper CP25/29 setting out proposed rules and guidance to implement the new framework for short selling under the Short Selling Regulations 2025, introduced on 13 January this year. These changes follow the Treasury’s Call for Evidence which closed in March 2023 and was updated with the Government’s response in July 2023, which concluded that the regime needed to be modified to alleviate disproportionate burdens on firms.

Why is the regime changing?

The current UK Short Selling Regulation (UK SSR) requires disclosure of significant net short positions and restricts uncovered short sales in UK-listed shares and UK sovereign debt. Originating from the EU Short Selling Regulation introduced after the 2008 financial crisis, the framework was retained in UK law post-Brexit under the European Union (Withdrawal) Act 2018, creating a UK-specific regime that largely mirrors its EU predecessor.

Using its powers under the Financial Services and Markets Act 2023, the Government will repeal the current UK SSR and the FCA will introduce a new framework through its own rules. In CP25/29, the FCA has set out its proposals that seek to modernise the regime by reducing unnecessary burdens, removing disproportionate costs and improving operational efficiency while preserving robust safeguards. In particular, the new UK SSR will remove the requirement for public disclosure of individual net short positions (NSPs).

Key FCA proposals

A dedicated section of the FCA Handbook will consolidate all short selling rules and guidance, replacing the current fragmented approach.

Proposed changes include:

• Position reporting: reporting deadlines for NSP changes will be extended to 23:59 T+1, and guidance will clarify how to calculate positions and issued share capital. The FCA plans to clarify that the list of financial instruments in Annex 1 is exhaustive for both long and short positions, removing ambiguity and ensuring consistency under Articles 5 and 6 of Delegated Regulation (EU) No 918/2012.
• Covering: records demonstrating appropriate covering agreements (i.e. agreements which show that the short seller has borrowed, or can borrow, shares to settle the short sale) must now be kept for a minimum of five years.
• The Reportable Shares List: a new Reportable Shares List (RSL) will replace the current exempt list, to clarify which shares are subject to reporting and covering obligations. The RSL will use broader criteria and be updated every two years, from 1 January to 1 April, with monthly adjustments.
• Market maker exemptions: the market maker exemptions process will be simplified, by reducing notification requirements and shortening lead time, allowing firms to access the exemption more quickly. However, market makers will need to submit new notifications in order to continue to make use of the exemption.
• Withdrawal of exemptions: the FCA will expand the circumstances where a firm must withdraw an exemption. Firms will be required to notify the FCA not only when eligibility changes or they no longer wish to use an exemption, but also when they themselves determine they no longer meet the exemption conditions.
• Public disclosure: the UK SSR replaces the current model which requires public disclosure of individual NSPs reaching or exceeding 0.5% of a company’s issued share capital as well as disclosure of any changes to NSPs above that threshold. The new model requires the combination of all individual NSPs above 0.2% as a single anonymised NSP (ANSP). The consultation paper proposes guidance on how the ANSP will be calculated and the timing, content and format of the disclosure.
• Waiver provisions: the FCA will allow firms to request a waiver from position reporting requirements in exceptional cases, such as when a systems outage prevents timely compliance.

Efficiency improvements and clarified guidance:

• Operational arrangements: the FCA will upgrade its systems for handling position reports and market maker notifications, improving efficiency and data quality, enabling automation for firms and strengthening its ability to monitor short selling activity.
• Emergency powers: the FCA will maintain its current approach to emergency powers but clarify when and how they may be used.

Next steps

The FCA is consulting until 16 December 2025 and expects to publish its final rules and policy statement ahead of the regime’s commencement. Firms should engage with the consultation and assess the impact of these proposals on their short selling activities.