The Short Selling (Notification Threshold) Regulations 20231 adopted as part of the post-Brexit review of the UK financial services regulatory framework will increase the initial threshold for reporting of net short positions to the UK’s Financial Conduct Authority (“FCA”) from 0.1 percent to 0.2 percent.
The disclosure obligations apply to all holders of net short positions in companies whose shares are admitted to trading on UK trading venues. These obligations capture positions held in shares directly, on swap, or through any other financial instruments, including depository receipts, baskets and any derivatives referencing the UK-listed shares.
Position holders are currently reporting their net short positions to the FCA starting at 0.1 percent. This lower threshold (which replaced the original 0.2 percent threshold) was first introduced under the European Union’s Covid-19 emergency measures, but later became permanent. This has led to a significant increase in the number of reports submitted to the FCA in recent years and has created a burdensome regime for market participants with minimal additional data analysis benefit to the FCA.
The new UK initial reporting threshold of 0.2 percent will apply from Feb. 5, 2024. From that date, position holders with net short positions below 0.2 percent will no longer be required to disclose their positions. The incremental reporting threshold of 0.1 percent for any net short positions above 0.2 percent will continue to apply.
Under the EU Short Selling Regulation2, the initial threshold of 0.1 percent continues to apply to net short positions in the share capital of issuers with shares admitted to trading in EU member states.
The UK HM Treasury has recently published the draft Short Selling Regulations 20243 (“Draft 2024 Regulations”) and its response to the consultation on further amendments to the UK short selling regime (“Consultation Response”).4 The following key reforms of the UK short selling regime are expected in the near term: