UK Net Short Position Disclosure Threshold Will Increase to 0.2% from 5 February 2024

The Financial Services and Markets Act 2023 has set about for the UK to repeal and replace all financial services legislation which is derived from the European Union (EU). The Short Selling Regulation is near the top of the UK government’s list for replacement: please see our article here, setting out some of the UK government’s proposals.

As part of this reform, the UK government has now laid before Parliament the Short Selling (Notification Threshold) Regulations 2023.¹ Once these become effective on 5 February 2024, the notification thresholds for the reporting of net short positions to the Financial Conduct Authority (FCA) will increase from 0.1% to 0.2%.

Firms will need to update their operational and compliance systems to ensure that they will reflect the higher threshold.

At the same time, the UK government has also progressed with its other proposals that form part of its Response to the Short Selling Review.²In particular, the government has published a draft statutory instrument³ alongside an explanatory policy note.⁴

When it is eventually brought into effect, and in accordance with what was set out in the Response, this statutory instrument is expected to include, amongst other things:

• A provision defining short selling as a designated activity subject to FCA regulation, and empowering the FCA to make rules applicable to persons engaging in that activity.
• Provisions granting and regulating the FCA’s authority in relation to short selling notification and disclosure requirements.
• Provisions empowering the FCA in relation to “exceptional circumstances” (for example, following a significant price fall).
• Provisions for moving from the current “negative list” of exempt overseas shares into a “positive list” of in scope domestic shares.

The UK government is welcoming any technical comments on the draft statutory instrument by 10 January 2024 and plans to lay this second instrument before Parliament in 2024. We will publish an update of relevant developments in due course.

^{1 https://www.legislation.gov.uk/uksi/2023/1258/contents/made.}

^{2 https://assets.publishing.service.gov.uk/media/64ad3e4fe1aab2000c03ad4c/Short_Selling_Regulation_Review_-_Government_response__1.pdf.}

^{3 https://assets.publishing.service.gov.uk/media/655bc6af544aea000dfb3106/M8212_Short_selling_draft_SI_.pdf.}

^{4 https://assets.publishing.service.gov.uk/media/655bc6d7d03a8d000d07fd13/M8212_Short_selling_policy_note.pdf.}