Short selling, long a contentious yet vital feature of financial markets, is once again in the spotlight as the UK’s Financial Conduct Authority (FCA) launches a consultation to revamp its regulation.
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The watchdog’s latest proposal seeks to balance market transparency and operational efficiency, designed to encourage trading activity without compromising oversight.
A Smarter, Simpler Framework
The FCA’s consultation, released today (Tuesday), outlines several key reforms aimed at making short selling more efficient and less burdensome for market participants.
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The plan follows the government’s legislative framework introduced in January 2025 and forms part of the UK’s broader post-Brexit effort to make its capital markets more competitive.
Under the proposed model, the FCA would introduce aggregated net short position disclosures, combining and anonymizing all individual positions reported above the 0.2% threshold. This approach would preserve transparency while protecting the identities of individual investors.
The regulator also plans to extend the reporting deadline for firms to submit their positions and to offer clearer guidance on how they calculate a company’s issued share capital. Together, these steps are meant to simplify compliance and reduce administrative strain.
Streamlined Processes for Market Makers
The proposals also aim to speed up and automate the reporting process. Market makers, who play a central role in providing liquidity, would benefit from upgraded systems for exemption notifications and position reporting. According to the FCA, the changes are designed to make submissions “easier, quicker, and less burdensome.”
The consultation reflects the regulator’s continuing shift toward data-driven oversight and proportional regulation , which prioritizes efficiency while maintaining safeguards for market integrity.
With feedback now open, the FCA’s short-selling review marks a pivotal moment in the UK’s efforts to modernize its financial rulebook for a global marketplace increasingly focused on agility and trust.
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The latest update follows FCA’s easing of retail investor access to crypto exchange-traded notes (cETNs). The regulator recently lifted a ban on cETNs, marking a notable shift in the UK’s regulatory stance toward digital asset investments.
Under the new framework, cETNs can be offered to retail investors provided they are listed on the FCA’s Official List and traded on a UK-recognized investment exchange. The policy aims to expand distribution opportunities for firms while maintaining safeguards to protect consumers through stricter disclosure and oversight requirements.
The regulator has classified cETNs as Restricted Mass Market Investments, bringing them under the financial promotion regime and ensuring that marketing materials meet standards designed to reduce the risk of investor harm.
