The Financial Conduct Authority (FCA) has released a Consultation Paper (CP25/29) inviting feedback on its proposed UK Short Selling Regime. The Consultation seeks to support economic growth by removing unnecessary barriers that might discourage or inhibit short selling, while maintaining sufficient oversight to ensure market integrity and orderly financial markets.
This initiative forms part of the government’s broader legislative programme announced in January 2025 and reflects the FCA’s commitment to being a more agile and effective regulator. The Consultation will be of interest to individuals and institutions engaged in short selling activity, market makers, securities lenders, issuers with shares admitted to trading on UK trading venues, legal firms, consultants and trade associations.
Background
The UK Short Selling Regulation (UK SSR), initially derived from EU law and retained in UK legislation through the European Union (Withdrawal) Act 2018, currently forms the legal foundation of the UK’s short selling regime. It governs short selling in financial instruments such as shares, UK sovereign debt and credit default swaps traded on UK venues.
Under the Financial Services and Markets Act 2023, the UK government is now repealing and replacing this assimilated law. As part of this process, HM Treasury has developed a new legislative framework for short selling, delegating authority to the FCA to establish firm-facing rules and retain emergency powers, consistent with the existing regime.
The FCA’s new proposals are informed by feedback from HM Treasury’s Short Selling Regulation: Call for Evidence, which found that although the current regime is broadly effective, it imposes disproportionate burdens that may deter legitimate market activity.
The proposed reforms aim to create a more efficient, coherent and proportionate regulatory framework, preserving transparency and control, while eliminating unnecessary compliance costs for firms.
Key Proposals
- Aggregated Net Short Position Disclosures
The FCA proposes a new model whereby net short positions exceeding the 0.2% threshold will be anonymised and aggregated before being disclosed. This approach aims to enhance market transparency without revealing individual firm identities.
- Improvements to Position Reporting
The FCA is proposing to extend the deadline for submitting short position reports and will publish clearer guidance on the calculation of issued share capital. This is intended to help firms determine their net positions more accurately and with greater confidence.
- Streamlined Market Maker Notifications
The notification system for market maker exemptions and reporting will be automated and streamlined. This will reduce the administrative burden on firms and improve the speed and efficiency of submissions.
Deadline for Responses
The FCA is inviting comments on the proposals by 16th December 2025. Feedback can be submitted via the online form on the their website.
How Complyport Can Help?
Complyport can support your firm in navigating the compliance challenges arising from this regulatory update by providing:
- Regulatory Guidance: Expert advice on how the FCA’s proposed changes may affect your firm’s short selling activities and reporting obligations.
- Ongoing Support: Continuous compliance assistance to ensure your firm remains aligned with evolving FCA expectations.
- Compliance Documentation: Review and update of your policies and procedures, including drafting new documentation to reflect the revised short selling requirements and related governance standards once finalised.
- Training: Tailored training sessions on the practical implications of the FCA’s proposals and best practices for compliance implementation.
Contact Us
To understand how these regulatory developments may impact your business and to discuss your compliance needs, contact Complyport today to book a meeting with one of our Subject Matter Experts.
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