Navigating the UK's Short Selling and Position Limits Reforms in 2025
Author:
International Regulatory Analyst, Confluence
The UK’s financial landscape is evolving with significant regulatory changes in short selling and position limits set to take effect in 2025 and 2026. These reforms are part of HM Treasury’s broader strategy to modernize financial services post-Brexit, ensuring competitiveness and growth for UK markets. Here’s what asset managers need to know about the upcoming changes.
Short Selling Regulations 2025: Key Changes
The UK has repealed and replaced the EU Short Selling Regulation (SSR), with certain provisions already in place and what we expect to follow throughout 2025.
Thresholds and Reporting Adjustments
- The initial reporting threshold remains at 0.2%.
- A consultation is planned for Q3 2025 to refine reporting deadlines, notification form and content, and the methodology for determining reportable shares.
Elimination of Sovereign Debt and CDS Reporting
- The new framework removes reporting and disclosure rules for sovereign debt and Credit Default Swaps (CDSs), lifting previous restrictions.
Public Disclosure Reforms
- The public disclosure threshold of 0.5% is eliminated. Instead, the FCA will publish anonymized, aggregated net short position data daily, enhancing transparency without exposing individual firm positions.
Expanded FCA Powers
- The FCA now has broad rule-making powers, allowing it to impose restrictions if necessary to maintain market stability.
- A shift from a “negative list” to a “positive list” for exempted shares will provide additional clarity on reportable securities.
Position Limits: Reforming the Commodity Derivatives Framework
Parallel to short-selling reforms, the UK is adjusting position limits under the Financial Services and Markets Act 2023, stemming from the UK’s Wholesale Markets Review.
Implementation Timeline
- 3 March 2025: Transitional provisions commence, allowing trading venues to notify the FCA of their methodologies for setting position limits and accountability thresholds, policies, and procedures.
- 6 July 2026: New rules fully come into force.
Key Position Limit Reforms
- Position limits will apply to a narrower set of critical commodity derivative contracts, ensuring they remain focused on high-impact instruments.
- Trading venues will establish their own position and accountability limits, with minor technical changes from the FCA. The new framework introduces distinctions for ‘spot months’ and ‘other months’ contracts.
- Similarly with the EU framework, the UK retains position limits for agricultural contracts and requires firms to hold positions that support liquidity obligations.
Loooking Ahead
These regulatory adjustments aim to streamline reporting obligations, enhance transparency, and refine the UK's market structure while fostering competitiveness. With phased implementation and ongoing consultations, market participants should stay engaged to adapt effectively to the evolving landscape.
As 2025 progresses, firms should monitor FCA guidance and prepare for upcoming consultations to ensure compliance with the new framework. Stay ahead of regulatory changes by keeping informed and adjusting strategies accordingly.
Disclaimer
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