The UK’s Financial Conduct Authority (FCA) has announced a major reform to the country’s short-selling disclosure rules, ending the requirement to publicly identify investors betting against listed companies. The move, unveiled on Tuesday, marks a significant post-Brexit divergence from the European Union’s financial regulations.
New Aggregated Disclosure System
Under the proposed framework, the FCA will publish only aggregate, anonymised data showing the total volume of short positions held against a company’s shares. Individual investors or hedge funds will no longer be named.
The regulator said the change will simplify compliance while maintaining market transparency. “These proposed changes are another important milestone in our drive to become a smarter regulator and to support growth,” said Simon Walls, executive director of markets at the FCA. He added that the new system would “enhance and streamline the short selling regime in the UK, reducing burdens for market participants while ensuring the market still gets the transparency it needs.”
The UK’s previous rules, inherited from the EU, required all short positions exceeding 0.5% of a company’s share capital to be disclosed publicly with investor names. Now, short sellers will continue to notify the FCA privately of positions exceeding 0.2%, but their identities will remain confidential.
Aligning with the US Model
The reform brings the UK in line with the United States, where short positions are disclosed only in aggregate form without identifying the investors. The FCA also plans to extend the reporting deadline for disclosures from 3:30 p.m. on the next trading day to midnight, and to simplify exemption procedures for market makers.
The government has been urging regulators to reduce administrative burdens on the financial sector as part of efforts to bolster the UK’s competitiveness as a global financial hub following Brexit.
Industry Reaction: Applause and Concern
The move has drawn praise from hedge funds and investment groups, who say the reform will strengthen London’s appeal to global investors. “Smart reforms will enhance UK financial markets, attract investment and support economic growth,” said Rob Hailey, head of EMEA government affairs at the Managed Funds Association.
However, critics warn that reduced transparency could enable market abuse or heighten volatility. “It beggars belief that policymakers would look to water down the supervisory regime for short selling further,” said Simon Youel, head of policy and advocacy at Positive Money, who argued that short selling “is too often abused cynically by hedge funds to juice returns” without contributing real economic value.
Dennis Kelleher, head of US-based Better Markets, expressed similar concerns, saying the reforms might fuel speculative trading: “Eliminating the disclosure of the identity of short sellers will likely result in increased short selling activity, but who would that benefit? More financial activity often leads to bubble growth, not economic growth that benefits the real productive economy.”
Legislative Context
The UK government laid the groundwork for the change in January, when it introduced new legislation to replace inherited EU rules. Britain has already removed restrictions on “naked” short selling of sovereign bonds—allowing investors to short without borrowing the underlying securities—though the FCA has kept a ban on naked shorting of shares.
The FCA will host an event next week to discuss the planned reforms. A public consultation on the proposal remains open until December 16.
If implemented, the new regime will mark another step in the UK’s bid to reshape post-Brexit financial regulation — balancing market efficiency with transparency in one of the world’s most scrutinized trading practices.
