Exemptions from short selling requirements

Market makers and authorised primary dealers can use exemptions from certain requirements of the Short Selling Regulation (SSR).

There are certain exemptions for market-making activities and primary market operations, under the SSR.

This means certain firms do not have to disclose net short positions – both private and public. 

These firms can also reduce the restrictions on entering into uncovered short positions in shares, sovereign debt and sovereign credit default swaps.

You cannot automatically use these exemptions and they are not unlimited – you can only be exempt when undertaking market-making activities and you cannot use them when carrying out proprietary trading. 

The exemption must also be applied to specific instruments.

See further information in our revised note on the UK notification process for market makers and authorised primary dealers (PDF). 

Notify us to use exemption

You must notify the relevant competent authority – in the UK this is the FCA – that you are intending to use the exemption 30 days before you intend to do so. 

When notifying us that your firm intends to use this exemption in relation to a financial instrument, you must use our forms  (see below) and provide certain evidence. 

To notify us please send the relevant forms and further information to [email protected]

We will contact you before the 30-day period has expired to confirm whether we will prohibit the use of the exemption or not. 

Notifier exemption forms and annexes

Notifiers intending to use the exemptions should use the relevant form and appropriate annexes.

Market makers

We expect all market maker exemption notifications will include the SSR-1 form and a list of instruments that includes at least the information in Annex I-A and/or I-B.

The annexes may be used as follows:

  • where the notifier is registered as a market-maker at a trading venue, it can use Annex I-A to list relevant financial instruments for which it is registered to make markets
  • where it is not registered as a market maker at any particular venue, Annex I-B should be used to list relevant instruments for which it is or intends to conduct market-making activities that fall within Article 2(1)(k) of the SSR
  • Annex II can be used to list the relevant trading venues of which the notifier is a member
  • Annex III can be used to provide additional information

Authorised primary dealers

We expect all authorised primary dealers exemption notifications will include the SSR-2 form and Annex I.

The annexes may be used as follows:

  • Annex I to provide information on the UK sovereign debt for which it intends to use the exemption
  • Annex II for relevant supporting documentation 

Prohibition from exemption

The relevant competent authority can prohibit you from using the exemption if it believes your firm does not satisfy the conditions of the exemption. 

The relevant competent authority can also stop you using it at any subsequent time if it considers that your firm no longer meets the conditions of the exemption. 

ESMA guidelines

ESMA has previously consulted on and published guidelines for market maker exemptions (PDF).

Third country market equivalence

Under the SSR, the Commission may deem the legal and supervisory framework of a third country market as equivalent in order to apply the exemption (Article 17(2)). 

The Commission has not published any equivalency declarations as at June 2016.