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Volume XI, Number 56

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UK Short Selling Notification Threshold Reduced to 0.1% and to Apply to Both Regulated Markets and MTFs...

On 6 January 2021, the HM Treasury published the Short Selling (Notification Thresholds) Regulations 2021 (the “Regulations”). The FCA has updated its webpage on the notification and disclosure of net short positions to include an update in respect of the same.

The Regulations amend the retained EU law version of the Short Selling Regulation (2012/236) in the UK (the “UK SSR”) by lowering the initial notification threshold, from 0.2% to 0.1%., for the reporting of net short positions to the FCA relating to the issued share capital of a company that has shares admitted to trading on a trading venue.  

In March 2020, The European Securities and Markets Authority made a temporary decision to apply a threshold of 0.1% for shares admitted to trading on regulated markets in EEA Member States, which was subsequently renewed – this was due to uncertainty caused by COVID-19. However, this decision ceased to have effect in the UK on 31 December 2020 – at the end of the Brexit transition period – meaning that the threshold reverted to 0.2%.

The Regulations will ensure that the lower threshold of 0.1% takes effect in the UK from 1 February 2021, when the Regulations come into force, and will apply indefinitely from that date. In the meantime, until 1 February 2021, notifications can be made to the FCA at the 0.1% threshold but this is not a formal requirement.

The purpose of this change is to ensure that the FCA receives the necessary data to effectively monitor short selling activity during times of increased market volatility caused in part by the COVID-19 pandemic. In addition, in contrast to EU Member States, the Regulations would mean that the 0.1% threshold will apply in respect of shares admitted to trading on UK regulated markets (such as the Main Market of the London Stock Exchange) and UK multilateral trading facilities (known as “MTFs”) (such as the Alternative Investment Market (AIM) of the London Stock Exchange), whereas in the EU the 0.1% threshold applies only in respect of shares admitted to trading on EU regulated markets. The government has taken this approach following market feedback provided to the FCA. It is expected that the consistency of applying the 0.1% threshold to regulated markets and MTFs should result in a simpler, less burdensome regime.

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© 2020 Proskauer Rose LLP. National Law Review, Volume XI, Number 8
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About this Author

Kirsten Lapham FInancial Services Attorney Proskauer Rose Law Firm, United Kingdom
Partner

Kirsten Lapham is a partner specialising in financial services regulation. She advises a broad range of both institutional and individual clients on a variety of financial services regulatory and compliance issues. Her practice has a specific emphasis on the regulatory issues arising under the AIFMD, and MiFID II for a range of EU and indirectly impacted firms outside of the EU.

Experience in this area includes advising multiple clients on the EU marketing and registration regimes and overlaying local regulatory considerations, such as the U.K. retail distribution...

+44.20.7280.2031
John Verwey, UK, European Level, Finance, Attorney, Proskauer Rose Law Firm
Special Regulatory Counsel

John Verwey is a special regulatory counsel in the Corporate Department and a member of the Private Investment Funds Group.

John advises on a wide number of regulatory issues at a national UK and European level, including firm authorisations, change in control, market abuse, Electronic Money Regulations, Payment Services Regulations and client money rules. He represents a variety of clients that range from private equity firms and insurance intermediaries to global investment banks and sovereign wealth funds. 

A particular area of focus for John is the implementation of...

+44.20.7280.2033
Associate

Michael Singh is an associate in the Corporate Department and a member of the Private Funds Group. Mr. Singh graduated from the University of South Wales in 2012.

+44.20.7280.2269
Amar Unadkat Corporate Lawyer Proskauer Rose Law Firm
Associate

Amar Unadkat is an associate in the Corporate Department and a member of the Private Funds Group.

Amar advises on a variety of regulatory issues including AIFMD, PSD II and MiFID II, both in the UK and at European level.

His clients include investment fund managers, FinTech companies, wealth management businesses, crowdfunding businesses (including P2P lending platforms), banks and funds seeking to market to investors

+44.20.7280.2144
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