UK stock shorting explainedUK stock shorting explained
A UK stock shorting explained who ‘shorts’ shares borrows those shares from a broker to sell them at market value and then aims to repurchase them at a lower price (returning the borrowed shares to the lender) to make a profit. Traders often short shares that they perceive are overvalued and anticipate the market will soon cotton on, causing them to fall.
To do this, traders use a financial broker who permits short selling, identify the shares they wish to short and then borrow the shares from their brokerage account before selling them. Traders then buy back the same number of shares at the lower price, return them to their broker and keep the profits.
UK stock shorting explained
In the UK, short selling is regulated by the FCA under the Financial Services and Markets Act 2023 (FSMA 2023) which over time will repeal retained EU laws. The government is consulting on the draft new Short Selling Regulations (SSR) that will replace existing EU rules.
The draft SSR is expected to come into effect in 2024 alongside a revised exemption regime and other new regulations under FSMA. The SSR includes changes to the current public disclosure of net short positions where these exceed 0.5% of issued share capital on a trading venue, and moves towards a broader list of exempted shares. It also enables the FCA to intervene in exceptional circumstances to limit shorting where that is believed to be harmful to markets.…