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The Short Selling Regulations 2024

Nov 29, 2023 5:35:27 PM

Update

The government has issued a draft SI with an accompanying policy note setting out how it plans to implement the previously announced reforms to the UK short selling regime, with any technical comments on the draft SI welcome until the 10th January 2024.

The SSR (Short Selling Regulation), applies to financial instruments admitted to trading or traded on a UK trading venue (unless principally traded on a third country venue). The regulation also applies to UK sovereign debt and related credit default swaps. The SSR has several core provisions:

  1. It requires holders of net short positions in shares or sovereign debt to make notifications of their positions to the FCA once certain thresholds are met.
  2. It requires holders of net short positions in shares to publicly disclose these positions once certain thresholds have been met.
  3. It outlines restrictions on investors entering into uncovered short positions in shares or sovereign debt.
  4. It allows persons carrying out stabilisations or persons that meet the definition of a market maker to apply to the FCA to be exempt from restrictions on uncovered short selling and notification requirements.
  5. It provides the FCA with powers to restrict short selling in certain circumstances to prevent a disorderly decline in the price of a financial instrument or in response to a serious threat to financial stability or market confidence.
  6. It contains buy-in procedures and late settlement requirements to ensure settlement discipline.

As per the Policy Instrument, the FCA will now be provided with a range of related rulemaking powers to specify firm-facing short selling requirements in their handbook. Also included are emergency intervention powers for the FCA to require additional short selling-related information and to restrict short-selling in exceptional circumstances. The FCA are however now expected to issue a statement of policy, setting out how they will use their powers to intervene in exceptional circumstances.

The Instrument now sets the initial notification threshold for net short position reporting to the FCA at 0.2% of issued share capital. It also requires the FCA to aggregate and publish net short positions they receive by issuer.

HM Treasury plans to lay this instrument before parliament in 2024, subject to Parliament time allowing. The legislation will commence at the same time as the FCA makes new rules, alongside the repeal of the SSR and other related legislation.

Link: https://www.gov.uk/government/publications/short-selling-regulations-2024