FCA statement on short selling bans and reporting

On 17 December 2020, the European Securities and Markets Authority (ESMA)[5] issued a decision renewing its original decision[6] on 16 March 2020 temporarily to amend the threshold for notifying net short positions to competent authorities under the Short Selling Regulation (SSR) from 0.2% of issued share capital to 0.1%. For the UK, this decision will apply from 19 December 2020 until the end of the transition period. Firms should continue reporting to us at this threshold until the end of the transition period.

Please see our notification and disclosure of net short positions[7] webpage for more information on the notification of net short positions after the end of the transition period, including an update relating to the Treasury announcement that they intend to lay a Statutory Instrument (SI) in early January to amend the threshold notification under Article 5(2) of the SSR from 0.2% to 0.1% of the issued share capital of an issuer. The SI will come into force from 1 February 2021.

On 16 September 2020, the European Securities and Markets Authority (ESMA)[8] issued a decision renewing its original decision[6] on 16 March 2020 temporarily to amend the threshold for notifying net short positions to Competent Authorities under the Short Selling Regulation (SSR) from 0.2% of issued share capital to 0.1%. This decision will apply from 18 September 2020 for 3 months.

Firms should continue reporting at the lower threshold.

In line with the SSR, the temporary reporting obligations will apply to shares for which the FCA is the relevant competent authority and not to exempted shares where the principal venue for their trading is outside the EU.

On 11 June 2020, the European Securities and Markets Authority (ESMA)[9] issued a decision renewing its original decision[9] on 16 March 2020 temporarily to amend the threshold for notifying net short positions to Competent Authorities under the Short Selling Regulation (SSR) from 0.2% of issued share capital to 0.1%. This decision will apply from 17 June 2020 for 3 months.

Firms should continue reporting at the lower threshold.

In line with the SSR, the temporary reporting obligations will apply to shares for which the FCA is the relevant competent authority and not to exempted shares where the principal venue for their trading is outside the EU.

On 16 March 2020, the European Securities and Markets Authority (ESMA) issued a decision[11] to temporarily amend the threshold for notifying net short positions to Competent Authorities under the SSR from 0.2% of issued share capital to 0.1%. 

We confirmed that this decision would apply in the UK. However, we stated that systems changes would be required and firms should continue to report at the previous thresholds until further notice. 

We can now confirm that the required changes to our systems have been made. We will be ready to receive notifications at the lower threshold from Monday 6 April 2020. Firms are not required to amend and resubmit notifications submitted to us between 16 March 2020 and 3 April 2020. 

Firms should make best efforts to report at the lower threshold from this date. However, we appreciate that it may not be possible for some firms to amend their systems by this date. If this is the case, please contact [email protected] to discuss further.

In line with the SSR, the new reporting obligation will apply to shares for which the FCA is the relevant competent authority and not to exempted shares where the principal venue for their trading is outside the EU.

If an EU regulator (or the FCA) decides to impose a ban, that regulator notifies other EU regulators and the FCA, who then consider whether to do the same in their jurisdictions. The intention is to avoid short selling activity linked to particular shares moving to other jurisdictions where these shares are also traded.

When considering whether to use our short selling powers following action by an EU regulator, our standard policy has been to assist that regulator. We expect to continue that policy for future requests unless, for exceptional reasons, we consider that our assistance is not necessary.

We have rarely imposed our own ban on the short selling of UK shares (although we did take some comparable actions in a few cases during the 2008 financial crisis). We have never initiated a ban under the new powers given to us by the SSR. While we cannot rule out that this will be appropriate in particular circumstances, we set a high bar on imposing any bans.

Our focus is on maintaining open markets that operate with integrity. We note that an ability to short sell can contribute to this, including by supporting effective price formation, enhancing liquidity and enabling risk management.

We note ESMA's decision[12] to amend the thresholds for the notification of short selling positions to Competent Authorities under the SSR.

We will apply this change in the UK.

This requires changes to our technology to receive these data. We are working on what is involved to effect these changes and how long it will take to implement them. In the meantime, firms should continue to report according to the previous thresholds, until further notice.