The regulator has introduced a further relaxation of the market maker exemption, amongst other amendments from its consultation proposals.
By Becky Critchley, Nicola Higgs, Rob Moulton, and Charlotte Collins
Key Points:
- The main commencement date for the regime has been set as 13 July 2026, giving firms three months to prepare for the changes.
- Many of the amendments are being implemented as proposed, but the FCA has decided to further simplify the market maker exemption by removing the requirement for firms to notify each financial instrument they want to benefit from the exemption.
On 16 April 2026, the FCA published its Policy Statement on changes to the UK Short Selling Regime (PS26/5). It previously consulted on these proposals in October 2025, setting out draft rules and guidance for the areas of the regime for which it will be responsible in accordance with The Short Selling Regulations 2025 (see this Latham blog post). Amongst other things, the FCA proposed to:
- Modify the reporting regime to reduce the administrative burden. This includes extending the reporting deadline to 23.59 on the working day after the day on which the reporting obligation is triggered, and updating systems so that firms can make bulk submissions covering multiple positions.
- Publish new guidance on how it will calculate, publish, update, and correct aggregate net short positions (ANSPs). Under The Short Selling Regulations 2025, the FCA is required to publish a single ANSP in relation to each relevant company, rather than requiring the public identification and disclosure of persons who hold net short positions (NSPs).
- Detail how it will publish and maintain its list of reportable shares, which will replace the current list of exempt shares. The FCA also proposed to amend the methodology for deciding which shares to exempt, with a view to reducing the number of shares in scope.
- Modify the process for notifying use of the market maker exemption, making the exemption easier and faster for firms to use. This includes reducing the notification period from 30 to 15 calendar days, removing the notification period for existing market makers adding financial instruments to their exemption, and creating a new automated system for notifications.
Key Changes
The FCA received 24 responses to its proposals, and is implementing these largely as consulted on. However, there are a handful of notable changes that firms should be aware of.
The main change from the consultation is that the FCA has sought to further simplify the market maker exemption. It has responded to feedback regarding the burdensome nature of the exemption process and decided to remove the requirement for market makers to notify each financial instrument they want to benefit from the exemption. Instead, market makers will submit a single “activity based” notification that allows them to use the exemption for market making activities in any financial instrument. However, market makers will need to submit an annual attestation by 1 June each year to demonstrate their compliance with the conditions to use the exemption, and may also need to respond to ad hoc information requests from the FCA to help it oversee compliance with the exemption conditions.
As a consequence of this simplification, the FCA is not now implementing arrangements to automate the market maker notification process. Instead, it will continue to accept market maker notifications via email, although it states that it will consider how to improve the notification process in future. Once the new regime commences, existing market makers will need to re-notify the FCA of their intention to keep using the exemption by 29 January 2027. The FCA has created a new streamlined notification form to be used for both new exemptions and re-notifications during the transitional period.
Another key piece of feedback related to the identification of companies’ issued share capital. The FCA previously acknowledged that firms may find difficulties in sourcing reliable data to calculate their NSPs, and had proposed to issue guidance on the sources of information which can be used to identify companies’ issued share capital, and to clarify that a person should act reasonably, having regard to publicly available information when calculating NSPs. It did not consider it was proportionate to establish a central source of issued share capital. However, respondents continued to highlight these difficulties and the FCA states that it will now consider, as part of its upcoming review of the Disclosure Guidance and Transparency Rules, whether it can replicate or leverage the existing arrangements in DTR 5 to require companies to disclose their issued share capital for short selling purposes. In the meantime, it has declined to identify a hierarchy of sources to use, as it considers that the most reliable source can vary on a case-by-case basis.
The final key change relates to implementation timing. The FCA originally proposed to commence the new regime two months after publication of the final rules. However, it has extended this to three months, to allow market participants more time to prepare.
The FCA has also provided various clarifications and minor adjustments in response to the feedback received. For example, it has clarified how it will apply the new exceptional circumstances reporting waiver in practice, it has separated its rules and guidance on shares that are principally traded in a third country and shares that are principally traded in the UK to clarify its approach, and it has amended timings so that it will publish monthly and ad hoc updates to its list of reportable shares by midday.
Implementation
The new FCA rules will take effect on 13 July 2026, and most changes will apply from this date (the remaining provisions of The Short Selling Regulations 2025 are also expected to take effect on the same date). However, the FCA’s system updates to enable bulk submissions of NSPs will take effect on 30 November 2026. These timings are captured in the FCA timeline below.
To assist firms with implementation, the FCA has also published a helpful operational guide, which explains all of the final changes to the regime and provides links to other supporting information. Further, the FCA has published a test copy of the reportable shares list, so that firms can test their systems ahead of the main commencement date. Although the implementation period has been extended, market participants do not have long to prepare for the new regime and should focus efforts on ensuring they are ready for 13 July. Market makers should ensure they are ready to submit their re-notification to the FCA once the regime commences.
Source: FCA