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Stock Market: Regulation

Question for Treasury

UIN HL12825, tabled on 1 February 2021

To ask Her Majesty's Government what plans they have to review regulations relatig to short selling  to ensure that any such regulations are fit for purpose.

Answered on

15 February 2021

The government works closely with the regulators and market participants to monitor the effectiveness of the regulatory regime, in line with the government’s objectives of supporting economic growth and financial stability.

The UK’s Short Selling Regime, introduced in 2012, regulates short selling practices while safeguarding companies and the financial system.

Among other things, it requires persons to report their short positions in companies whose shares are admitted to trading on UK trading venues, and provides the Financial Conduct Authority (FCA) with powers to request information from persons on their short selling activities, to apply penalties to persons who do not meet their regulatory obligations under the short selling regime, and to restrict the short selling of certain instruments in certain circumstances.

In particular, the FCA can temporarily restrict short selling when the price of an instrument has fallen significantly during a single trading day in relation to the closing price of that instrument on the previous trading day, and can restrict short selling for a period of up to three months when there are adverse events or developments which are a serious threat to financial stability or to market confidence in the UK.

It is the Government’s position that this regime is working as intended, providing the necessary safeguards to allow the operation of a fair and effective market. Therefore, we see no need to conduct a full review of this legislation at this time.

Answered by

Treasury