FCA PS26/5: Changes to the UK Short Selling Regime - Simpler Rules, Greater Transparency, July 2026 Live
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The FCA has finalised the new short-selling rulebook, ending individual firm disclosure and introducing aggregated position data, a significant change for hedge funds, prime brokers and market makers.
Context:
On 16 April 2026, the FCA published Policy Statement PS26/5, the final rules for the new UK short-selling regime, following consultation paper CP25/29 published in October 2025. The new regime applies from 13 July 2026 (Phase 1), with bulk reporting system changes following on 30 November 2026 (Phase 2).
The background is the UK government's 'repeal and replace' programme under the Financial Services and Markets Act 2023 (FSMA 2023), which has given the FCA powers to create new firm-facing rules replacing the retained EU Short Selling Regulations (UK SSR). HM Treasury's Call for Evidence on the short-selling regime concluded that it was not necessary to fundamentally change the regime, but that it should be modernised to reduce disproportionate burdens while maintaining adequate oversight.
The most significant change is the shift from individual firm disclosure to aggregate net short position (ANSP) publication. From 13 July 2026, the FCA will publish aggregated net short position data at or above the 0.2% threshold by company, replacing the previous regime where individual firms' net short positions at or above 0.5% were publicly disclosed by firm name. This reduces the market intelligence available to competitors about specific firms' positions, while the FCA retains full access to underlying firm-level data for supervisory purposes.
Rules and Guidelines:
The new short-selling rules are contained in a new Short Selling Sourcebook within the FCA Handbook. Key rule changes from 13 July 2026 include: (i) UK sovereign credit default swaps (CDS) are removed from position reporting and covering requirements; (ii) the existing exemption for market making in UK sovereign debt is removed but the FCA's emergency powers continue to cover sovereign debt instruments; (iii) the deadline for reporting net short positions is extended to 23:59 on T+1, giving firms more time to calculate and submit data; (iv) a new Reportable Shares List replaces the former Exempted Shares List, defining the scope of UK-listed shares requiring reporting; and (v) market maker exemption processes are simplified, replacing multiple notification requirements with an annual attestation.
On covering requirements: firms must retain records of covering arrangements for five years. The FCA has clarified the types of third parties with whom covering agreements and arrangements can be made. For companies with more than one class of share admitted to UK trading, the FCA will consider collective trading volumes across all classes when applying thresholds.
Phase 2 (30 November 2026) implements bulk reporting, enabling persons to upload and submit multiple positions in a single submission through the FCA's Enforcement, Supervision and Surveillance (ESS) system. An updated ESS user guide will be published on 30 September 2026 to give firms sufficient time to adjust.
Businesses Affected:
Hedge funds, investment managers and other institutional investors with net short positions in UK-listed shares.
Prime brokers provide stock lending and short-sale facilitation services to institutional clients.
Market makers active in UK-listed equities, who must adjust their annual attestation processes to replace multiple notification requirements.
Compliance and reporting teams at asset managers who currently manage individual firm NSP disclosures will need to update reporting systems for the T+1 extended deadline and ANSP format.
Law firms and compliance advisers are supporting firms through the transition, particularly on the covering requirement documentation changes.
Next Steps:
Update reporting systems for the T+1 extended deadline (23:59 on T+1) from 13 July 2026. Test submission processes against the new FCA ESS system before go-live.
Review market maker exemption documentation to move from multiple notifications to an annual attestation process. Ensure legal and compliance teams understand the new conditions for using the exemption.
Review and update the covering arrangement documentation. Ensure five-year record retention policies are in place for covering records.
Prepare for the bulk reporting Phase 2 system changes in November 2026. Review the updated ESS user guide when published on 30 September 2026.
Remove UK sovereign CDS from net short position calculations from 13 July 2026. Remove UK sovereign debt from market maker exemption notification processes.
Sources | Financial Conduct Authority | PS26/5 Policy Statement
