The UK’s Financial Conduct Authority (FCA) has launched a new consultation aimed at overhauling its short selling regulation, promising a framework that is more efficient, transparent, and easier to comply with. The proposed measures form part of the FCA’s ongoing efforts to modernize UK financial markets and reduce unnecessary administrative burdens, while preserving oversight and market integrity.
A Smarter, Simpler Framework
The FCA’s consultation paper, published today (Tuesday), lays out a series of reforms designed to streamline short-selling reporting and boost market competitiveness.
The regulator’s initiative follows the UK government’s legislative framework introduced in January 2025, part of a broader post-Brexit strategy to strengthen London’s position as a leading global financial hub.
One of the most notable proposals is the introduction of aggregated and anonymized net short position disclosures. Under this model, all individual short positions above the 0.2% threshold would be combined into a single published figure. This method aims to maintain market transparency while protecting the identities of individual investors — a balance that has long been debated within regulatory circles.
The FCA also plans to:
-
Extend reporting deadlines for firms to submit their positions.
-
Clarify calculation methods for determining a company’s issued share capital.
-
Simplify compliance requirements to reduce the administrative burden on smaller firms.
Together, these measures are intended to make short selling more accessible and less cumbersome without eroding the FCA’s ability to detect market abuse or systemic risk.
Streamlined Processes for Market Makers
A significant portion of the proposal focuses on market makers, whose liquidity provision plays a key role in maintaining orderly trading conditions.
The FCA plans to automate exemption notifications and simplify position reporting systems. The proposed changes would leverage technology to make reporting “easier, quicker, and less burdensome,” according to the consultation document.
This move aligns with the regulator’s broader shift toward data-driven oversight, where automation and real-time analytics replace manual reporting to improve responsiveness and efficiency.
By modernizing short-selling rules, the FCA seeks to promote a more agile financial system capable of adapting to evolving market conditions without sacrificing the standards that ensure fairness and investor confidence.
Encouraging Market Participation
The reforms are part of the UK’s wider initiative to enhance capital market competitiveness and make it easier for both domestic and international investors to participate in UK-listed securities.
By anonymizing short position data, the FCA hopes to alleviate concerns from institutional investors who have previously argued that public identification of large short positions exposes them to front-running and unfair market reactions.
At the same time, the regulator insists that aggregate disclosures will still provide sufficient visibility into short interest, allowing market participants and the public to assess investor sentiment toward particular securities.
Consultation and Feedback Period
The FCA’s consultation is open for industry feedback over the coming weeks. Input from broker-dealers, institutional investors, fund managers, and market infrastructure providers will help shape the final regulatory design.
Once finalized, the rules are expected to take effect in early 2026, subject to parliamentary approval.
This consultation marks another key milestone in the FCA’s post-Brexit regulatory evolution, following several recent initiatives to boost market innovation and reduce friction in capital flows.
FCA’s Broader Regulatory Shift
The short-selling reform follows a series of high-profile policy changes by the FCA in 2025, reflecting its ongoing push toward modern, proportionate regulation.
Earlier this year, the regulator lifted its ban on retail access to crypto exchange-traded notes (cETNs) — a major shift in the UK’s stance on digital asset investments. Under the updated framework, retail investors can now access cETNs listed on the FCA’s Official List and traded on UK-recognized investment exchanges, provided strict disclosure and risk-management requirements are met.
cETNs have been reclassified as Restricted Mass Market Investments (RMMIs), ensuring they fall within the financial promotion regime. This move brings stricter oversight of marketing materials and investor suitability tests to mitigate risks associated with volatile digital assets.
Maintaining Balance: Oversight and Innovation
The FCA’s dual-track approach—simplifying compliance while maintaining transparency and investor protection—underscores its effort to strike a pragmatic balance between innovation and regulation.
By anonymizing data and automating reporting, the regulator aims to encourage greater participation from market makers and institutional investors, while safeguarding against potential abuses such as naked short selling or false price signaling.
At the same time, the FCA’s push for more data-driven supervision demonstrates its intention to reduce reliance on manual processes and enable faster, technology-assisted enforcement.
A Turning Point for UK Markets
Industry analysts view this consultation as part of a larger effort to reposition the UK as a flexible, competitive, and innovation-friendly marketplace.
If adopted, the reforms could serve as a blueprint for other jurisdictions seeking to modernize short-selling oversight without dampening liquidity or investor confidence.
The FCA’s initiative also reinforces the regulator’s broader agenda of aligning financial innovation with regulatory trust—an approach increasingly seen as essential for attracting global capital and fostering sustainable market growth.
Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice. Regulatory proposals are subject to consultation and may change before implementation.