We have regulated short selling and certain aspects of credit default swaps (CDS) in the UK since 1 November 2012, under the Short Selling Regulation (SSR).
The SSR applies to people undertaking short selling of shares, sovereign debt, sovereign CDS and related instruments that are admitted to trading or traded on an EEA trading venue (unless they are primarily traded on a third country venue).
It requires holders of net short positions in shares or sovereign debt to make notifications once certain thresholds have been breached. See more on notification and disclosure of net short positions.
The SSR also outlines further restrictions on investors entering into uncovered short positions in shares or sovereign debt.
Our intervention powers
Significant price falls
The SSR gives powers to competent authorities – in the UK this is the FCA – to suspend short selling or limit transactions when the price of various instruments (including shares, sovereign and corporate bonds, and ETFs) fall by set percentage amounts from the previous day’s closing price.
FINMAR 2.5.6 sets out details on the exchange rate used for converting EUR into GBP for the purposes of article 23(1)(b) of the Commission Delegated Regulation (EU) No 918/2012. From 04 October 2016 the corresponding sterling price for €0.5 is £0.44.
Exceptional market conditions
We also have powers under the SSR to address adverse events or developments that pose a serious threat to financial stability or market confidence.
These powers may include:
- extending the scope of the notification and disclosure regime to include additional financial instruments
- requiring lenders of financial instruments to notify any significant change in their fees
- restricting short selling, or other transactions that confer a financial advantage in the event of a decrease in price of a financial instrument, across classes of instruments or all instruments
- restricting, or limiting, entering into sovereign credit default swap transactions
We may also need to consider whether to follow another competent authority’s decision to undertake any of the above in its own jurisdiction if the instrument is also traded on a UK venue.
If we make such a decision, we must make it public. We will do this through an announcement via a PIP and on our current restrictions and prohibitions web page.
SSR and supplementary texts
For more information about short selling see the SSR and supplementary texts:
- Short Selling Regulation (EU) No 236/2012
- Commission Delegated Regulation (EU) No 826/2012
- Commission Implementing Regulation (EU) No 827/2012
- Commission Delegated Regulation (EU) No 918/2012
- Commission Delegated Regulation (EU) No 919/2012