FCA updates SSR onshoring rules ahead of Brexit conclusion
06 November 2020 UK
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The UK’s Financial Conduct Authority has published new information advising firms that report net short positions on what to do during and after the Brexit transition period.
The UK left the EU on 31 January and entered a transition period which ends on 31 December.
During the transition period, the EU Short Selling Regulation (SSR) continues to apply in the UK, including the market making exemption.
The update explains the short-sale reporting requirements in the UK following the “onshoring” of the EU SSR as of 2021.
The FCA expects position holders to report their net short positions in shares at the 0.2 percent, rather than the ESMA-mandated temporary 0.1 percent threshold which is currently set to expire in December but may be extended again.
The disclosure thresholds with respect to UK sovereign debt and uncovered positions in UK sovereign credit default swaps remain unchanged.
The FCA is advising firms to consult the UK list of exempted shares and the Financial Instrument Reference Data System to determine whether a notification is required. This list will be available from the start of 2021.
The FCA notes that managers should be “mindful” of their short sale reporting obligations, particularly in light of the FCA’s penalty against Asia Research and Capital Management (ARCM) for short selling violations.
The Hong Kong-based asset management firm found itself on the wrong side of the EU’s SSR when it failed to report hundreds of equity swaps over the past two years that gave it a significant net short position to hedge against its investment in Premier Oil.
This fine marks the first action taken by the FCA to enforce a breach of the short selling regulation.
The UK left the EU on 31 January and entered a transition period which ends on 31 December.
During the transition period, the EU Short Selling Regulation (SSR) continues to apply in the UK, including the market making exemption.
The update explains the short-sale reporting requirements in the UK following the “onshoring” of the EU SSR as of 2021.
The FCA expects position holders to report their net short positions in shares at the 0.2 percent, rather than the ESMA-mandated temporary 0.1 percent threshold which is currently set to expire in December but may be extended again.
The disclosure thresholds with respect to UK sovereign debt and uncovered positions in UK sovereign credit default swaps remain unchanged.
The FCA is advising firms to consult the UK list of exempted shares and the Financial Instrument Reference Data System to determine whether a notification is required. This list will be available from the start of 2021.
The FCA notes that managers should be “mindful” of their short sale reporting obligations, particularly in light of the FCA’s penalty against Asia Research and Capital Management (ARCM) for short selling violations.
The Hong Kong-based asset management firm found itself on the wrong side of the EU’s SSR when it failed to report hundreds of equity swaps over the past two years that gave it a significant net short position to hedge against its investment in Premier Oil.
This fine marks the first action taken by the FCA to enforce a breach of the short selling regulation.
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