As market volatility has increased in the wake of the Covid-19 outbreak, several competent authorities have imposed bans on short sales in certain shares.

Approach taken by the Financial Conduct Authority (the FCA)

To date, the FCA has introduced only temporary prohibitions on short selling in certain listed instruments, on the 13 and 17 March 2020, as set out below. It has not introduced outright bans that are reciprocal to the approach taken by other regulators, and this is consistent with its policy to assist other regulators rather than imposing its own bans on the short selling of UK shares. The FCA’s focus is on maintaining open markets that operate with integrity and in its view, an ability to short sell can contribute to this. A summary of the FCA’s approach is available (here).

On 31^st March, the FCA issued a statement (found here) confirming that ESMA’s decision of 16 March (described below) also applies in the UK, and that the required changes to the FCA’s systems have now been made. The FCA will be ready to receive notifications at the lower threshold of 0.1% from Monday 6 March 2020. Firms are not required to amend and resubmit notifications submitted to the FCA between 16 March 2020 and 3 April 2020. The FCA expects firms to make best efforts to report at the lower threshold from this date. However, the regulator appreciates that it may not be possible for some firms to amend their systems by this date. If this is the case, please contact PMU@fca.org.uk to discuss further.

Approach taken by other competent authorities

To date, several other competent authorities have introduced short selling restrictions, and we set out below a summary of these developments. It is worth noting that to date, and by way of example, the regulators in Canada, Hong Kong, Luxembourg and the USA in particular, have not taken similar steps.

Other announcements