The FCA has released Consultation Paper CP25/29, setting out proposed reforms to the UK short-selling regime. The proposals are designed to streamline reporting requirements, enhance market integrity, and support growth and liquidity in UK capital markets. The changes will be most relevant to investment firms, market makers and firms engaged in securities lending.
These reforms also reflect the broader post-Brexit regulatory direction of travel across both the FCA and PRA, moving further away from inherited EU frameworks and towards a more proportionate, UK-specific model, aligned with the government’s competitiveness and growth agenda under the Smarter Regulatory Framework.
In summary, while firms will continue to report net short positions, the regime is expected to introduce revised reporting processes and public disclosure requirements, alongside changes to reporting timelines, submission mechanisms and record-keeping obligations.
Key proposals include:
Introduction of a new Short Selling Sourcebook
- The existing on-shored EU rules are proposed to be replaced with a dedicated FCA sourcebook, consolidating requirements into a clearer and more accessible UK rule set. The FCA will also integrate guidance and supervisory expectations to support practical application.
Extension of reporting deadline to 23:59 on T+1
- Net short position reports will need to be submitted by the end of the business day following the trading day, giving firms greater operational flexibility compared to intraday deadlines.
Simplified market maker notification process
- The FCA will proposal streamlines market maker exemption notifications, removing duplicative steps and reducing administrative friction for firms relying on this relief.
Aggregated public disclosure regime
- Instead of publishing the identities of individual firms holding reportable short positions, the FCA proposes market-level aggregated disclosures. This aims to protect proprietary trading strategies while still providing transparency to market participants.
Introduction of a UK-specific in-scope securities list
- The existing EU approach is recommended to be replaced with an FCA-maintained list of instruments within scope of the short-selling rules. This is expected to provide greater clarity and reduce reliance on external reference data providers.
Five-year record-keeping requirement
- Firms will need to retain evidence of share-borrowing arrangements and availability of cover for a minimum period of five years, supporting supervisory oversight and enforcement capability.
Enhanced digital reporting architecture
- The FCA plans to introduce new digital filing options, including bulk upload and API-based submissions, replacing manual and legacy processes and aligning with its broader data-modernisation programme.
These changes matter. You must have accurate data and strong control processes to identify net short positions and evidence borrowing arrangements. Therefore, we recommend reviewing your internal reporting systems, governance and escalation processes. In addition, you should test your data capture, retention and MI reporting.
Consumer Duty may not directly apply to institutional short selling. However, the FCA increasingly applies Duty concepts across wholesale markets. Consequently, we expect scrutiny on governance, oversight and transparency. For example, weak monitoring or unclear responsibilities could attract challenge.
You can read the FCA consultation on the regulator’s website. Responses close on 16 December 2025. We encourage firms to assess the operational impact and respond if the changes require system investment or manual process redesign.
What firms should do now
The FCA expects firms to prepare early where change is clearly likely, particularly where proposals affect reporting, systems, governance and SMCR accountability. Consultation Papers aren’t hypothetical, they typically signal intended direction, especially where they build on government policy (e.g., Smarter Regulatory Framework, post-EU reforms).
Pragmatic position for firms
A reasonable middle ground is to remain actively engaged in developments while avoiding premature or resource-intensive change. In practice, this means:
- Monitor the consultation and forthcoming policy statement, noting expected timelines.
- Perform a light-touch impact assessment to understand which business areas, systems and reporting processes may be affected.
- Engage key internal stakeholders (Front Office, Operations, Compliance, Technology, SMFs) so awareness and ownership are clear.
- Map dependencies on data and reporting tools, particularly for T+1 reporting and potential digital / API submissions.
- Review policies, procedures and record-keeping arrangements at a high level to identify areas likely to require update.
- Plan for implementation, but defer detailed operational or systems build until the rules are finalised.
How we support you:
- Short‑selling governance and control framework reviews
- Regulatory reporting health checks
- Surveillance and trade oversight assessments
- SMCR responsibility mapping and governance documentation
- Policy and procedure updates
- Board MI and control reporting design
- Training for senior managers and operations teams
Visit our site to explore our Market Conduct Advisory and Regulatory Reporting Support services.
Final thought
These reforms simplify the regime. However, they also raise expectations on data accuracy, governance and oversight. Preparing early reduces operational disruption and strengthens regulatory confidence. We help firms implement proportionate and effective frameworks.
