United Kingdom (and EU regulation)

New FCA Brexit webpages – market making exemptions and net short positions reporting

By Imogen Garner (UK) and Iona Wright (UK) on October 29, 2020 Posted in Brexit, United Kingdom

On 28 October 2020, the FCA published the following new webpages:

Market making exemptions and preparing for Brexit. The webpage explains that under the onshored Short Selling Regulation, any firm wishing to use the exemption for transactions due to market making activities will be required to join a UK trading venue and notify the FCA of their intention to use the market maker exemption in writing 30 days ahead of their intended use. Notices of intention given to the FCA before the end of the transition period remain valid. Firms that have already notified the FCA of an intention to use the market maker exemption and remain members of a UK trading venue will be able to continue using the exemption after the transition period comes to an end only for instruments traded on UK trading venues. Notifications made to the FCA for instruments traded in the EU will no longer be valid. To be able to use the onshored Short Selling Regulation market maker exemption from the end of the transition period, EEA market makers that are not already members of a UK trading venue will need to become members of a UK trading venue and, at least 30 days before the end of the transition period, provide the FCA with a notification or a copy of any notification made to another competent authority.
Net short positions reporting and preparing for Brexit. This webpage is useful for firms that report net short positions and provides them with information regarding what they should do during and after the transition period. In terms of after the transition period, under the onshored Short Selling Regulation, position holders will be required to report their net short positions in shares at the 0.20% threshold. The reporting thresholds for UK sovereign debt and uncovered positions in UK sovereign credit default swaps will remain the same. The amount of the outstanding UK sovereign debt will be updated quarterly by the FCA on its website. To determine whether a position in shares should be notified to the FCA, position holders will have to consult the FCA’s Financial Instruments Reference Data System for a particular share and also the UK list of exempted shares to see if that share is exempt. If a share is not exempt, position holders should send their notification to the FCA. The UK list of exempted shares will be in an Excel file which will be published on the FCA’s website from 1 January 2021.

Further information on the changes introduced by the onshored Short Selling Regulation is available in the FCA’s Primary Market Bulletins 21 and 24 published in February and October 2019.