FCA proposes new short selling rules for the UK

The Financial Conduct Authority is consulting on a new draft rulebook for short selling. As required by legislation, the FCA’s rules move away from the current regime in some areas, such as how net short positions are disclosed to the market. The consultation is open for seven weeks, closing on 16 December 2025.

Replacing the UK SRR

Earlier this year Parliament made the Short Selling Regulations 2025. These Regulations will replace the UK Short Selling Regulation (UK SSR) which derives from EU law. The Regulations set the framework for regulating short selling, such as specifying the extent of the regime and the FCA’s powers.

Under the new regime, the FCA is responsible for setting the rules and guidance that will apply to firms. It is this regime that the FCA is now consulting on. Until this process is complete and the FCA's rules for its new Short Selling Rules sourcebook are made and in effect, however, the UK SSR will continue to apply.

Key changes

In CP25/29 the FCA is consulting on a draft Short Selling Rules sourcebook (perhaps confusingly to be known as the SSR). This largely replicates the existing UK SRR plus changes that HMT had already promised through its development of the Short Selling Regulations 2025.

Proposed changes in the FCA's draft rules as compared to the current regime include:

• Position reporting: Extending the deadline for notifying a change in net short positions to the end of the working day following the working day on which the reporting obligation is triggered.

• Net short positions: Providing new guidance on the sources of information for determining a company’s issued share capital and when to calculate the net short position.

• Record-keeping: Building on ESMA's Q&A to require short sellers to hold details of covering arrangements for at least five years.

• Reportable shares list: Replacing the “negative” list of shares where the primary liquidity is overseas with that are exempt from the UK SSR with a new “positive” list of admitted shares which are subject to the UK regime. The FCA proposes that it will publish the list every two years on 1 April.

• Market maker notifications: Reducing the timeframe for notifying the FCA when seeking to benefit from the market making exemption for the first time to 15 days (down from 30 under the current regime). Existing market makers will also benefit from a more streamlined process for extending their exemption to more financial instruments. The FCA proposes that pre-existing exemptions will be rolled over until 1 June 2027.

• Public disclosure: New processes for the FCA to publish net short positions reported as aggregate net short positions in relation to each company (rather than identifying individual positions).

• Approach to waivers: The FCA may provide a waiver from the position reporting rules in exceptional circumstances, such as a systems outage that would prevent meeting position reporting requirements.

The FCA also proposes consequential changes to other parts of its Handbook, such as its Supervision Sourcebook and Enforcement Guide.

Approach to emergency powers

The consultation includes a draft Statement of Policy on the FCA’s approach to exercising its emergency powers in relation to short selling. The statement includes a standardised template for making announcements to the market. The FCA says that it plans to maintain its current approach which sets a “high bar” to using its emergency powers.

Implementing the new regime

The FCA is proposing a two-phase approach to updating its systems in preparation for the new regime.

• Phase 1: Its new systems for calculating and publishing aggregated net short positions and the reportable shares list will be ready for when the new regime starts to apply.

• Phase 2: Six months later the FCA will update its systems for position reports and market maker exemption notifications.

Next steps

The FCA plans to finalise its rules two months before the commencement date for the new regime. HM Treasury is still to confirm this date. When publishing its policy statement, the FCA will also release the draft copy of the reportable shares list for firms to upload into their systems.

The consultation closes on 16 December 2025.