On 18 December 2020, the FCA updated its webpage on the notification and reporting of short sales under its newly onshored regime (“UK SSR”). This follows an update from HM Treasury that it intends to revise the notification thresholds in a Statutory Instrument in early January, which in turn follows ESMA’s announcement on 17 December 2020 that it will be extending the requirement to report short sales in shares at the lower 0.1% threshold for a further 3 months.
The revised UK regime
As discussed in our note on 11 November 2020, UK SSR applies from 1 January 2021. Originally, the UK authorities signalled a return to reporting at or above the 0.2% threshold. In a change of heart presumably triggered by the ESMA announcement, they have now decided to follow suit with the 0.1% threshold being reapplied from 1 February 2021.
Summarising these notification requirements in both the EU and UK:
- Firms must report relevant short positions to EU regulators at the 0.1% level at least until 17 March 2021.
- Short positions notifiable to the UK’s FCA need only be reported at the 0.2% level during the month of January, reverting to the 0.1% level from 1 February 2021. Note however that the FCA have stated that they will allow firms to report at the 0.1% from 1 January 2021 if they prefer.
What shares are caught by the UK regime? A reminder:
Taking over the role previously carried out by ESMA, the FCA is now publishing on its website the list of instruments caught by the UK regime – the so-called Financial Instruments Reference Data System (FIRDS). This list may include some non-UK issuers whose shares happen to have their principal trading venue in the UK.
The FCA has also published a list of UK shares which are exempt from the obligation to report (because their principal trading venue is outside the UK) plus ESMA’s list of exempted UK shares as of 31 December 2020 – this latter list remains exempt from UK reporting obligations for a further two years from 1 January 2021. See here under the UK list of Exempted Shares.
An early taste of post-Brexit accommodation?
Although the UK authorities’ decision on short selling was announced at a moment when negotiations on a trade deal were still on a knife-edge, it does signal a willingness to mirror EU financial regulations in the absence of a strong reason to do otherwise. Following the Trade and Cooperation Agreement announced on 24 December, this picture of harmony is, in our view, likely to have been reinforced for the foreseeable future.
Firms should review their processes for identifying and reporting under both UK and EU SSR regimes.
For further information on this alert, please speak to Martin Lovick or your usual ACA consultant at +44 (0)20 7042 0500.
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