The Short Selling Regulations 2025

Part 2 Designated Activities, FCA Designated Activity Rule-Making Powers and Obligations of the FCA

Designated activities: short selling of admitted shares and related transactions

4.  The following activities are specified under section 71K of FSMA 2000 as designated activities for the purposes of that Act—

(a) entering into a short sale of an admitted share;

(b) entering into any transaction other than a short sale of an admitted share, where an effect of the transaction is to confer a financial advantage on the person entering into that transaction in the event of a decrease in the price or value of an admitted share.

FCA rules relating to short selling of admitted shares and related transactions

5.—(1) Subject to paragraph (3), the FCA may make designated activity rules relating to the carrying on of the activities specified in regulation 4.

(2) Designated activity rules made by virtue of this regulation may, in particular, make provision—

(a) requiring persons carrying on an activity specified in regulation 4(a) to make arrangements, such as borrowing the admitted share or entering into an agreement or arrangement to borrow the admitted share, to ensure or create a reasonable expectation that settlement of those transactions can be effected when due;

(b) about the type or features of an agreement or arrangement that satisfy such a requirement.

(3) The FCA may not make rules by virtue of paragraph (1) requiring a person—

(a) to notify it of a net short position in the issued share capital of a company (but see regulation 6(1)), or

(b) to publish such a net short position.

FCA rules requiring notification of a significant net short position in the issued share capital of a company

6.—(1) The FCA may make designated activity rules requiring a person who has a net short position which is—

(a) in the issued share capital of a company which has admitted shares, and

(b) equal to or greater than the notification threshold,

to notify the FCA.

(2) The notification threshold referred to in paragraph (1) is 0.2% of the issued share capital of the company.

(3) For the purposes of this regulation—

(a) a person has a net short position in the issued share capital of a company if the person’s total short position in the issued share capital of that company exceeds the person’s total long position in the issued share capital of that company;

(b) a short position in the issued share capital of a company is the position resulting from—

(i) a short sale of a share issued by the company, or

(ii) entering into a transaction, other than a short sale of a share issued by the company, where an effect of the transaction is to confer a financial advantage on the person entering into that transaction in the event of a decrease in the price or value of a share issued by the company;

(c) a long position in the issued share capital of a company is the position resulting from—

(i) holding a share issued by the company, or

(ii) entering into any transaction where an effect of the transaction is to confer a financial advantage on the person entering into that transaction in the event of an increase in the price or value of a share issued by the company.

(4) Designated activity rules made by virtue of paragraph (1) may, in particular, make provision as to—

(a) the circumstances in which a person has a net short position in the issued share capital of a company for the purpose of rules made by virtue of this regulation, including provision as to the circumstances in which a person is considered to hold a share;

(b) the calculation of a person’s net short position, including—

(i) the transactions that are to be taken into account when calculating a person’s net short position;

(ii) the treatment of short or long positions held by different entities in a group;

(iii) the treatment of short or long positions held by or under different fund structures;

(c) the circumstances in which a notification is required to be re-made or updated, including for example where a person’s net short position falls below the notification threshold.

Publication by the FCA of aggregate net short positions

7.—(1) Subject to paragraph (7), for each working day the FCA must publish the aggregate net short position in relation to the issued share capital of a company that has admitted shares.

(2) Subject to paragraph (5), the aggregate net short position in relation to the issued share capital of a company, for the purpose of this regulation, is the sum of the net short positions in the issued share capital of the company notified to the FCA and held on the relevant working day, expressed as a percentage of the company’s issued share capital.

(3) For the purpose of paragraph (2), a net short position is held on the relevant working day if—

(a) it is notified to the FCA by a person (“P”) as being held on that day, or

(b) in a case where P has not notified the FCA of a net short position held on that working day, it is P’s most recent notification of its net short position held on a prior working day.

(4) The FCA must publish the aggregate net short position no later than two working days after the day to which the figure relates.

(5) In calculating the aggregate net short position in relation to a company, the FCA may exclude—

(a) a net short position notified to it in a case where it is carrying out work to verify the reliability of that notified position;

(b) information received after the working day prior to publication.

(6) The FCA may amend or re-publish a previously published aggregate net short position, including to take account of notifications received, verified or amended since publication.

(7) The FCA is not required to publish the aggregate net short position in relation to a company for a working day on which the aggregate net short position, calculated in accordance with paragraphs (2) and (3), is zero.

(8) In this regulation a net short position is notified to the FCA if it is notified pursuant to rules made by virtue of regulation 6 or a requirement imposed under regulation 13(1).

(9) In this regulation “working day” means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday under the Banking and Financial Dealings Act 1971(1) in any part of the United Kingdom.

FCA power to provide for waiver or exemption from rules and obligation to publish list of shares in relation to which rules apply

8.—(1) Designated activity rules made by the FCA by virtue of regulation 5 or 6 may include provision—

(a) as to the circumstances in which the FCA may determine that requirements imposed by those rules do not apply in relation to an admitted share or description of such shares;

(b) enabling requirements imposed by the rules to be dispensed with, modified, or reimposed (with or without modification) in such other cases or circumstances as may be determined by the FCA under the rules.

(2) The FCA may not make a determination under paragraph (1)(b) in relation to transactions performed due to market making activities of an investment firm, credit institution or overseas entity that is a member of a trading venue in an overseas jurisdiction unless that jurisdiction has been designated under Part 3 of these Regulations, where “market making activities”, “investment firm” and “overseas entity” have the meaning given in regulation 9.

(3) The FCA may publish any decision made by virtue of paragraph (1)(b) in the way appearing to the FCA to be best calculated to bring it to the attention of persons likely to be affected by it.

(4) The FCA must publish and keep updated regularly a list of admitted shares in relation to which it considers rules made by virtue of these Regulations apply.

FCA power to exempt market making activities and stabilisation

9.—(1) Designated activity rules made by the FCA by virtue of regulation 5 or 6 may provide for an exemption from those rules where—

(a) a transaction is performed due to market making activities, or

(b) a person—

(i) enters into a short sale of an admitted share, or

(ii) has a net short position,

in relation to the carrying out of a stabilisation.

(2) The FCA may only provide for an exemption relating to market making activities under paragraph (1)(a) in respect of the market making activities of an investment firm, credit institution, or overseas entity that is a member of—

(a) a UK trading venue, or

(b) a trading venue in an overseas jurisdiction designated under Part 3 of these Regulations.

(3) The FCA may make designated activity rules relating to an exemption provided for by virtue of this regulation, including in particular provision—

(a) supplementing paragraph (5)(c) as to what constitutes market making activities for the purposes of this regulation;

(b) requiring any person that intends to use an exemption provided for by virtue of paragraph (1) to notify the FCA of its intention to do so;

(c) requiring any person who has given a notification of the kind described in sub-paragraph (b) to notify the FCA where there are any changes affecting that person’s eligibility to use an exemption or where they no longer wish to use an exemption;

(d) requiring a person using an exemption provided for by virtue of paragraph (1) to provide the FCA, in writing, with information about positions held or activities conducted under the exemption;

(e) as to the form, content and timing of a notification or information referred to in sub-paragraphs (b) to (d);

(f) regarding the prohibition or suspension of the use of an exemption where the FCA considers that a person using or intending to use the exemption does not satisfy the conditions relating to the exemption.

(4) Where the FCA’s rules contain provision of the kind described in paragraph (3)(b) or (c), the FCA must publish a list of persons who are using an exemption provided for by virtue of paragraph (1).

(5) In this regulation—

(a) “credit institution” means an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account;

(b) “investment firm” means a person whose regular occupation or business is the provision or performance of investment services and activities on a professional basis;

(c) “market making activities” means the activities of an investment firm, a credit institution or an overseas entity where it deals as principal in a financial instrument, whether traded on or outside a trading venue in any of the following capacities—

(i) by posting firm, simultaneous two-way quotes of comparable size and at competitive prices, with the result of providing liquidity on a regular and ongoing basis to the market;

(ii) as part of its usual business, by fulfilling orders initiated by clients or in response to clients’ requests to trade;

(iii) by hedging positions arising from the fulfilment of tasks under paragraph (i) or (ii);

(d) “overseas entity” means a body incorporated in, or formed under the law of, any overseas jurisdiction;

(e) “stabilisation” means a stabilisation under Chapter III of Commission Delegated Regulation (EU) 2016/1052 of 8 March 2016 supplementing Regulation (EU) No596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the conditions applicable to buy-back programmes and stabilisation measures(2).

Power of FCA to give directions in relation to activities specified in regulation 4

10.—(1) The FCA may give directions under section 71O of FSMA 2000 imposing on a person such requirements as the FCA considers appropriate relating to the carrying on of the activities specified in regulation 4.

(2) The FCA may give a direction described in paragraph (1) only if it appears to the FCA that the person is failing, or is likely to fail, to comply with a requirement imposed by designated activity rules made by virtue of regulation 5 or 6.

(1)

1971 c. 80.

(2)

EUR 2016/1052. Relevant amendments were made by the Technical Standards (Prospectus Regulation) (EU Exit) Instrument 2020/50 (Financial Conduct Authority). A copy of this instrument is available at https://www.handbook.fca.org.uk/instrument/2020/FCA_2020_50.pdf and may be obtained from the Financial Conduct Authority, 12 Endeavour Square, London E20 1JN.