FCA changes UK short selling rules

The Financial Conduct Authority has finalised new short selling rules which will take effect from 13 July 2026. The FCA’s regime reflects changes made in legislation which replace the previous EU-derived framework. UK firms will need to make operational changes to implement the new regime and, where necessary, manage divergence with EU rules.

Key features

Under the new regime:

• The FCA will publish aggregated data showing the overall size of net short positions in each company, rather than identifying individual short sellers,

• UK sovereign credit default swaps are outside the scope of position reporting and covering requirements, and

• A new reportable shares list will replace the list of exempt shares and set out the shares that are subject to the short selling rules.

Policy changes

PS26/5 confirms the policy approach which was proposed in CP25/29. Changes made since the consultation include:

• Allowing market makers to submit a single “activity-based” notification covering all their market making activities, without needing to list individual instruments,

• Requiring market makers to submit an annual attestation signed by a senior manager to demonstrate compliance with the conditions to use the exemption,

• Extending the reporting deadline for net short position notifications to 23:59 on the working day following the working day on which the reporting obligation is triggered,

• New guidance that firms should “act reasonably” using publicly available information and conduct proportionate due diligence when sourcing issued share capital information,

• Clarifying that for exchange traded funds managed on a discretionary basis the management entity accounts for positions in the underlying shares whereas for passively managed ETFs it is the unit-holder who must account for those positions,

• Changing the processes around reporting positions at group level,

• Introducing guidance that locates are less appropriate for covering short positions in illiquid shares, and

• Setting up a waiver mechanism allowing firms to apply for relief from position reporting obligations in exceptional circumstances, such as a systems outage.

Next steps

To allow sufficient time to implement the new regime alongside operational changes, the new regime will come into force in two phases:

• Phase 1 starts on 13 July 2026 when the new rules, the FCA’s anonymous aggregate net short position disclosure system, and the new reportable shares list all come into effect.

• Phase 2 starts on 30 November 2026 when updated reporting systems will allow bulk submissions. The implementation window has been extended from two to three months following publication of the policy statement.

The first annual market maker attestation is due on 1 June 2027.

Linklaters webinar

Join us on Wednesday 6 May 1-2pm BST for a webinar in which the Linklaters financial regulation team will introduce the redesigned regulatory framework for short selling in the UK and how it compares and interacts with the EU regime. Get in touch with us to register.