An updated draft version of the Short Selling Regulations 2024, alongside an explanatory memorandum and de minimis impact assessment, have been laid before Parliament. The draft Regulations establish a new legislative framework for the regulation of short selling, creating designated activities for short selling, giving the Financial Conduct Authority rulemaking powers related to these activities and powers to intervene in exceptional circumstances. The updated draft Regulations do not include any requirements for short positions in sovereign debt or sovereign CDS, including the related reporting requirements. This maintains the policy approach previously announced of revoking the short-selling regime for these instruments, for business-as-usual reporting. Sovereign debt and sovereign CDS will, however, be in scope of the FCA's powers in exceptional circumstances.
The updated draft Regulations amend some of the provisions in the original draft SSR and add new provisions on:
- the overseas trading venue short selling regime: the draft Regulations empower the FCA to make rules exempting market making activities. However, an exemption may only be made for the market making activities of an investment firm, bank, or overseas entity that is a member of a U.K. trading venue or a non-U.K. trading venue in a jurisdiction that has been "designated" by HM Treasury. The updated draft regulations grant HM Treasury powers to designate jurisdictions having considered any relevant factors, which may include the jurisdiction's regime for markets, rules for admission of securities to trading, market transparency and integrity, and the prevention of insider dealing and market manipulation. A designation may be annulled by resolution of either House of Parliament.
- buy-in procedures: these provisions impose obligations on U.K. CCPs providing clearing services for shares to ensure delivery and settlement.
- supervision and enforcement: the updated draft Regulations include provisions to replace the FCA's existing short selling supervision and enforcement powers with powers to supervise and enforce the new regime.
Certain provisions will enter into force on the day after the Regulations are made, including provisions that enable the FCA to issue guidance or statements of policy. The remaining provisions will come into force when the existing Short Selling Regulations are revoked. The FCA's rules will apply from that date.
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