UK Short Selling Regulation Explained: FCA PS26/5 and the 2026 Go-Live

The UK's reformed short selling regulation is rolling out under the Financial Conduct Authority's (FCA) new rulebook, set out in Policy Statement PS26/5, replacing the UK's EU-derived Short Selling Regulation with a UK-specific regime. The new rules go live in two phases, on 13 July 2026 and 30 November 2026, and change how net short positions in UK shares must be disclosed. For anyone working in securities lending, prime brokerage, or compliance, understanding the new disclosure thresholds and mechanics is essential.

Why the UK reformed its short selling rules

The UK inherited its original short selling disclosure regime from the EU's Short Selling Regulation, retained in UK law after Brexit. As part of the broader post-Brexit regulatory review that also produced the Edinburgh Reforms, the Treasury and FCA concluded the inherited regime was more rigid and less risk-based than needed, particularly around when individual short positions had to be disclosed publicly versus only to the regulator. The FCA's consultation and subsequent PS26/5 policy statement set out a revised approach designed to reduce unnecessary disclosure burden while preserving the regulator's ability to monitor short selling activity for market abuse risk.

What changed under PS26/5

The key structural change is a shift toward aggregated, anonymised public disclosure of short interest at the issuer level, rather than requiring every individual short seller's position above a threshold to be disclosed with their identity attached once it crosses the public disclosure bar. Individual position holders still report their positions to the FCA privately once they cross the regulatory notification threshold, preserving the regulator's supervisory visibility, but public market disclosure moves to an aggregated basis showing total short interest in a stock without naming every individual holder. This was intended to reduce the risk that public disclosure of individual large short positions could itself move markets or expose short sellers to retaliatory trading, a criticism that had been raised against the previous individual-disclosure model.

The two-phase go-live

The FCA structured implementation in two stages to give firms time to adapt reporting systems:

• 13 July 2026 — the first phase, covering the shift to the FCA's updated private notification mechanism and systems changes for regulatory reporting.
• 30 November 2026 — the second phase, covering the move to aggregated public disclosure of short interest data.

Firms engaged in short selling UK shares, including hedge funds and their prime brokers, needed to have updated position-monitoring and reporting systems in place ahead of each phase to remain compliant.

Relevance to securities lending

Short selling regulation is closely tied to the mechanics of securities lending, since most short sales are executed by first borrowing the shares being sold short. Changes to disclosure thresholds and reporting mechanics directly affect how securities lending desks and prime brokers track and report client short activity, even though the lending transaction itself is governed by separate contractual and market infrastructure rules.

FAQ

Does PS26/5 remove short position disclosure entirely?

No. It changes the disclosure model from individual named disclosure above a public threshold to aggregated anonymised disclosure, while private regulatory notification of individual positions continues.

Does the new regime apply to short selling of non-UK shares?

No, the FCA's regime applies to short selling of UK-listed shares; short selling of shares listed elsewhere is governed by that jurisdiction's own rules, such as the EU's Short Selling Regulation for EU-listed shares.

Is this related to the EU's own short selling rules?

The UK regime originated from the same EU framework before Brexit but has now diverged, following the same broader pattern of UK-EU regulatory divergence seen in reforms like the Edinburgh Reforms.

Finance professionals studying UK securities regulation can build this knowledge through Learnsignal's CPD courses, which are updated to reflect regulatory changes like PS26/5 as they take effect.

Enforcement and non-compliance risk

Failure to meet either the private regulatory notification threshold or, from November 2026, the aggregated public disclosure obligations exposes firms to FCA enforcement action, which can include financial penalties and, in serious or repeated cases, restrictions on a firm's ability to carry out further short selling in UK markets. The FCA has signalled that it will prioritise supervisory engagement during the transition period covering both go-live dates, giving firms a window to identify and correct systems or process gaps, but this does not remove the underlying obligation to be compliant from each phase's effective date. Compliance and risk teams at firms with active short books in UK equities needed to map their existing position-monitoring systems against the new aggregated disclosure methodology well ahead of the July 2026 phase to avoid gaps.

Market transparency implications

The move to aggregated public disclosure sits alongside other UK and EU initiatives aimed at improving market transparency through better data infrastructure, such as the EU's Consolidated Tape for equities trading data. While the consolidated tape addresses price and volume transparency, the UK's reformed short selling disclosure addresses a different transparency question — how much of a stock's outstanding shares are currently sold short — and together these initiatives reflect a broader regulatory trend toward giving the market better aggregated data without necessarily increasing the granular disclosure burden on individual market participants.