The UK’s financial watchdog, the Financial Conduct Authority (FCA), has eased restrictions on hedge funds after relaxing rules on short selling, and slashing administrative and reporting requirements, according to a report by CNBC.
The shift marks a major step-change in the way the Financial Conduct Authority regulates investors who bet against the value of companies, and comes as part of a broader UK push to cut red tape.
The FCA, which oversees UK financial services firms and markets, said Thursday its new framework provides “clearer and simpler” rules on short selling.
Short-selling – a core component of many hedge fund strategies – has often come under fire for destabilising markets and accelerating sharp sell-offs during bouts of extreme volatility and pushing vulnerable companies into distress. But the FCA said shorting techniques play a crucial role in facilitating price discovery, liquidity, and risk management in financial markets.
Under the new framework, which takes effect on 13 July, the FCA will now publish aggregated data showing the overall size of net short positions in each company – a major departure from current rules that identify individual short sellers.
By removing the requirement to publicly name individual short sellers, the FCA’s new anonymised, aggregated disclosure model eliminates what the industry sees as reputational and strategic risk faced by short sellers. It allows hedge funds to operate more freely without exposing their strategies or triggering market backlash, copycat trades, or short squeezes.
UK investors subject to the regime will now benefit from a “more workable timetable” for short position disclosures, the FCA said, easing compliance costs for the UK’s hedge fund industry, particularly smaller and emerging firms.
