Background
On 16 April 2026, the FCA published its Policy Statement, confirming that the existing UK Short Selling Regulation (UK SSR) will be replaced by a new FCA rulebook (the Short Selling Sourcebook), alongside provisions in the Short Selling Regulations 2025 (SSR 2025). This follows their consultation published back in October.
The reforms do not represent a fundamental redesign of the short selling regime but instead focus on simplifying existing requirements, reducing operational burden, and improving clarity while maintaining market integrity.
Who is affected
The new regime applies to any person engaging in short selling activity in instruments admitted to trading on UK venues. This includes asset managers, hedge funds, proprietary trading firms, brokers and market makers.
Under the Designated Activities Regime, the rules apply on an activity basis. As a result, firms and persons that are not FCA-authorised may still fall within scope.
What firms need to do
Firms will need to update their short selling frameworks to reflect changes to the reporting rules, as set out below.
Position reporting requirements remain broadly unchanged. Firms must continue to report net short positions at 0.2% of issued share capital and at each 0.1% increment above that level. However, the reporting deadline will move to 23:59 on T+1 (from the current 15:30 T+1 requirement). Firms will also need to review FCA guidance on calculation methodologies and data sources, including how issued share capital is determined. The FCA has also clarified that firms may use third-party service providers to submit position reports on their behalf, although responsibility for compliance remains with the firm.
Group reporting arrangements will need to be reviewed to ensure positions are reported correctly at group level and to avoid duplication or gaps. The FCA will introduce additional reporting fields to support this.
The most significant change is to public disclosure. Under the current regime, individual net short positions of 0.5% or more are publicly disclosed, including the identity of the position holder. This requirement will be removed. Instead, the FCA will publish a single aggregated net short position for each issuer, calculated by combining all reported positions at or above 0.2%. These disclosures will be anonymised, meaning the market will be able to see the overall level of short interest in a company, but not which firms hold those positions.
Under the existing regime, the FCA publishes a list of shares that are exempt from short selling reporting and covering requirements, typically because they are primarily traded outside the UK. This will be replaced by a new “reportable shares list”, which will be updated every two years on 1 April. Firms will need to ensure that their trade monitoring and reporting systems incorporate this list to identify in-scope instruments.
For market makers, the exemption process has been materially simplified. Rather than notifying the FCA on an instrument-by-instrument basis, market makers will now submit a single “activity-based” notification, allowing them to rely on the exemption across all financial instruments in which they are market making. Market makers will also be required to submit an annual attestation confirming compliance with the conditions of the exemption. The FCA may request information from firms on an ongoing basis to support supervision. From an operational perspective, notifications will continue to be submitted via email from the start of the new regime.
Covering requirements will largely remain unchanged, although firms will be required to retain evidence of covering arrangements for at least five years. Firms should ensure that data retention policies are updated accordingly.
Firms should note that UK sovereign debt and associated CDS will now fall outside the scope of the regime. Where relevant, firms should remove these instruments from short selling reporting workflows.
Timeline
- 13 July 2026 (Phase 1 – main commencement date): New regime comes into force, including the Short Selling Sourcebook, the reportable shares list, aggregate net short position disclosure, and the Statement of Policy
- 30 November 2026 (Phase 2): FCA systems updated to support bulk position reporting submissions
- 29 January 2027: End of transitional period for market maker exemptions
- 1 June 2027: First annual market maker attestation due
Firms should plan for implementation ahead of 13 July 2026, particularly in relation to reporting systems, data processes, and internal controls. The FCA has also published supporting operational materials, including a test version of the reportable shares list, which firms should review as part of their implementation planning.
Key takeaway
The reforms refine rather than overhaul the current regime. The most significant changes are the move to aggregate (rather than individual) disclosure, the extension of the reporting deadline, and the introduction of a new FCA rulebook. The regime also introduces a simplified, activity-based market maker exemption and a revised approach to determining in-scope instruments through the reportable shares list.
Firms should begin reviewing and updating their policies, procedures and systems ahead of implementation to ensure alignment with the Short Selling Sourcebook and the revised operational requirements.
If you have any questions about the changes to the short selling regime or require any other assistance, please contact our team of experts here at Cosegic.
