Draft regulations offer FCA powers to restrict short selling in 'exceptional circumstances'
The regulator must post a notice explaining why the measure has been taken, a duration of impact and regularly review the prohibition or restriction.
Published alongside today's (22 November) Autumn Statement, the draft regulations would grant the regulator the power to «prohibit or impose conditions» on individuals entering into a short sale of a share or debt instrument, or any other transaction that offers «a financial advantage» in the event of a decrease in the price or value of another instrument.
Autumn Statement 23: FCA mulls 'interim solutions' to address investment trust cost disclosure concerns
The FCA would also be able to prohibit or restrict short sales in the event of a significant fall in the price of a financial instrument during a single trading day.
To exercise these powers, it must be convinced there are «adverse events or developments which constitute a serious threat to financial stability or to market confidence» in the UK, although the power must not have a «detrimental effect on the efficiency of the financial markets disproportionate to its benefits».
The regulator must post a notice explaining why the measure has been taken, a duration of impact and regularly review the prohibition or restriction.
Within the regulations, short selling will be defined as a designated activity, allowing the Treasury to provide the FCA with rulemaking, supervisory and enforcement powers without requiring all firms to seek FCA authorisation.
Autumn Statement 23: LTAFs to be included in ISAs amid sweeping regime overhaul
New disclosure rules will set the initial notification threshold for net short position reporting to the FCA at 0.2% of issued share capital, as has already been reported, while requiring the FCA
Read more on investmentweek.co.uk
