From ‘Who Is Short?’ to ‘How Much Is Short?’: The UK’s Recalibration of Short-Selling Transparency

The UK’s new short-selling regime, which came into force on 13 July 2026, marks a significant shift in the way short-selling activity is made visible to the market. As a former EU Member State, the UK was subject to the EU Short Selling Regulation, including its identity-based public disclosure requirements, and retained that framework in domestic law following Brexit until the new UK regime came into force. The reform therefore represents a deliberate move away from the EU model: while the Financial Conduct Authority (‘FCA’) continues to receive individual position reports, public disclosure now takes place only on an aggregated, issuer-level basis. This is not a retreat from transparency, but a recalibration of its form. It reflects a different view of what the market needs to know: not necessarily who is short, but how much short exposure exists.  

The origins of identity-based disclosure

The origins of the identity-based disclosure model lie in the regulatory response to the 2008 global financial crisis. Amid severe market volatility and declining asset prices, several European jurisdictions, including the UK, introduced emergency restrictions on short selling, including temporary bans and enhanced disclosure requirements. The resulting fragmentation prompted efforts to develop a more coordinated approach to short-selling regulation.

At the international level, the International Organization of Securities Commissions (‘IOSCO’) identified reporting as a core principle of effective short-selling regulation, serving regulatory monitoring, early warning and market-abuse detection. Importantly, however, IOSCO did not prescribe public identification of individual short sellers, contemplating reporting either to the market or to regulatory authorities.

In Europe, the then Committee of European Securities Regulators (‘CESR’) went further. It favoured a two-tier model under which significant net short positions would first be reported privately to regulators and, at a higher threshold, disclosed publicly. The distinction reflected two related but different objectives: confidential reporting would provide regulators with early warning and supervisory visibility, while public disclosure would provide information to the wider market and was expected to constrain aggressive large-scale short selling.

This approach was ultimately incorporated into the EU Short Selling Regulation, adopted in 2012. The Regulation established confidential notification of significant net short positions to competent authorities and public disclosure at a higher threshold. The EU framework therefore embedded a particular conception of transparency: for sufficiently significant short positions, market visibility extended to who was short.

The UK operated under this framework as an EU Member State and, following Brexit, initially retained its central features in domestic law. 

From identification to aggregation

In its 2022 Call for Evidence, HM Treasury questioned whether the existing framework was operating as intended and, in particular, whether public disclosure of individual positions could discourage legitimate short-selling activity in ways that adversely affected market efficiency and price formation.

The consultation exposed a fundamental tension in the design of short-selling transparency. Public disclosure can provide investors with information about significant short-selling activity and may promote market confidence. Yet identifying the investor behind the position can also affect the behaviour that the regime seeks to make transparent. Industry respondents argued that disclosure above the 0.5% threshold could discourage investors from building larger positions, expose proprietary investment strategies, facilitate copycat trading and increase vulnerability to short squeezes. These effects could, in turn, impair liquidity and the contribution of informed short selling to price discovery.

HM Treasury ultimately concluded that aggregation offered a different balance. In its response to the consultation, the Government considered that aggregated disclosure could preserve transparency over short-selling activity while avoiding the ‘potential distortive impacts’ associated with publicly identifying individual position holders. This policy choice was subsequently implemented through the Short Selling Regulations 2025 and the FCA’s new rules. In its final Policy Statement, PS26/5, the FCA maintained the aggregated model notwithstanding concerns that anonymisation would reduce information available to issuers and other market participants.

The resulting architecture draws a clearer distinction between regulatory visibility and public transparency. The FCA continues to receive information identifying holders of significant individual positions, while the market receives information about their aggregate scale. Public identification is therefore no longer treated as a necessary component of short-selling transparency.

Empirical perspective

The concerns underlying the UK reform find support in empirical studies of the EU regime. ESMA identified unusual behaviour immediately below the 0.5% public disclosure threshold: positions were less likely to increase and remained there longer, particularly where the investor had not previously been publicly identified. Using confidential German supervisory data, Jank, Roling and Smajlbegovic similarly find substantial bunching below the publication threshold. Importantly, investors avoiding disclosure appear comparatively well informed, with their positions predicting subsequent negative abnormal returns. This suggests that public identification may constrain precisely the short selling that contributes valuable information to prices.

Yet identity itself can also be informative. Verrecchia and Zhu find that markets respond more strongly to disclosed positions held by investors perceived to be better informed, with trader identity contributing to price adjustment, subsequent trading, and the incorporation of future earnings information into prices.

The evidence therefore reveals a genuine trade-off. Public identification may improve price discovery after disclosure by helping the market assess the informational quality of a position, while weakening it before disclosure by discouraging informed investors from establishing or expanding positions. Existing studies identify both effects, but do not establish which dominates overall.

Conclusion

The UK has chosen to separate confidential supervisory reporting from public market disclosure. The FCA continues to receive the identity and size of significant individual net short positions, while the market now only receives aggregated issuer-level information without public disclosure of the identity of individual short position holders. This design preserves regulatory visibility while addressing concerns that public identification may itself affect short-selling behaviour.

The empirical evidence supports the logic of that distinction, while also showing that the trade-off is not one-sided. The identity of a short position holder can provide additional information to the market, particularly where that investor is perceived to be well informed. At the same time, public identification may discourage informed investors from establishing or increasing significant short positions. Where individual position information is already available to the FCA through confidential reporting, aggregated disclosure provides a credible means of preserving market transparency without exposing individual short position holders to the same disclosure-related effects.

The direction of the reform is therefore persuasive, but its effects remain to be tested. As evidence develops under the new regime, particular attention should be paid to its impact on liquidity, price discovery and the informational value of published short-position data. In this respect, the UK reform will provide an important case for assessing whether aggregated disclosure can better achieve the objectives of short-selling transparency than the public identification of individual short position holders.

Mahammad Jafarov is a Senior Legal Consultant at Deloitte Azerbaijan.