On Jan. 14, UK Treasury issued the Short Selling Regulations 2025.
UK Treasury issued The Short Selling Regulations 2025 (StIn 2025/29), providing for short selling of shares, other financial instruments, transactions similar to short sale.
When the UK left the EU, the body of EU legislation that applied directly in the UK at point of exit was transferred into UK law by the European Union Withdrawal Act 2018.
This is known as assimilated law; Financial Services and Markets Act 2023 (FSMA 2023 (UK)) repeals assimilated law in financial services, subject to commencement.
Assimilated law relating to financial services will be replaced with rules set by the financial services regulators, operating within a framework set by UK GVT and UKP.
These regulations establish a new legislative framework for the regulation of short selling, creating designated activities for short selling, giving UK FCA rulemaking powers for these activities and powers to intervene in exceptional circumstances.
Through UK FCA taking on additional rulemaking responsibilities, financial services firms, consumers will benefit from agile, tailored rule-making that suits UK markets.
They replace Regulation 236/2012 on short selling and certain aspects of credit default swaps, which is due to be revoked by FSMA 2023 (UK), section 1 once commenced.
This instrument restates some provisions of Reg 236/2012 with modifications, exercising powers in section 4 of FSMA 2023 (UK); also makes provision under powers in Part 5A of the Financial Services and Markets Act 2000 (FSMA 2000 (UK)).
Details
Regulation 4 specifies certain activities under section 71K of FSMA 2000 (UK) as designated activities for the purposes of that act; regulations 5, 6, 8, 9 enable UK FCA to make designated activity rules - per section 71L(3) FSMA 2000 (UK) relating to the activities specified in regulation 4, and provide in those rules for exemptions/waivers.
Regulation 8 also requires UK FCA to publish a list of shares in relation to which it considers the rules apply; regulation 7 requires UK FCA, for each working day, to publish aggregate net short position held in the issued share capital of a company.
Regulation 10 allows UK FCA to give directions to a person who is failing, or is likely to fail, to comply with a requirement imposed by virtue of Part 2 of these regulations.
Regulation 11 enables UK Treasury to make regulations designating an overseas jurisdiction for the purpose of applying an exemption provided for in FCA rules.
Reg. 12 provides that each EEA state is to be treated as designated for this purpose.
Regs. 13-17 allow UK FCA to impose measures in relation to the short sale of financial instruments, or transactions with a similar effect, in exceptional circumstances.
Regulations 16(1) and 17(2) set out the conditions for the exercise of these powers.
Regulations 18-20 require UK FCA to publish a notice of the exercise of these powers.
And to review any measure imposed under these powers, publish a statement of policy.
Reg. 21 allows UK FCA to give directions to a person who is failing, or is likely to fail, to comply with a requirement, prohibition or condition imposed by regulations 13-15.
Regulation 22 sets out requirements on central counterparties relating to procedures and fines where sellers using those counterparties fail to settle transactions in shares.
Regulation 23 allows UK FCA to give directions to a person who is failing, or is likely to fail, to comply with a requirement imposed by regulation 22; regs. 24-26 and schedule 1 make provision about supervision, enforcement; regs 27-29 make saving provision.
Regulation 30 and schedule 2 make consequential amendments to other legislation.
Other legislation will be revoked in connection with these Regulations in a commencement instrument made under the power in section 1 of FSMA 2023 (UK).
Effectiveness
Regulations 1 to 6, 8, 9, 11 are in force the day after these regulations were made, i.e. Jan. 14, 2025 (initial commencement day); remaining provisions in force on initial commencement day for purpose of enabling FCA to issue guidance/policy statements.
So far as not already in force, regulations in into force on main commencement day, which is the day on which the revocation of the short selling regulation by section 1(1) of, and schedule 1 to, the Financial Services and Markets Act 2023 comes into force.
