The European Principal Traders Association has responded to the Financial Conduct Authority’s Consultation Paper on the UK Short Selling Regime (CP25/29).
EPTA is generally in favour of the proposed changes while suggesting some further reforms to meet the UK’s objective, which is to reduce the operational burden on firms and make the SSR fit for its market.
Principal Trading Firms are very supportive of the proposed changes to the Market Maker Exemption. The proposals will significantly streamline operation of the MME. EPTA’s response calls further for the MME to apply at activity level rather than ISIN level, and for the FCA to grant the exemption across an index, among other suggestions to improve the administration of the MME.
To simplify and clarify Net Short Position Reporting, EPTA advocates for the FCA to provide more specific guidance on the sources that firms should refer to when determining the issued share capital (ISC), in order to calculate NSP.
EPTA agrees with the FCA proposals to aggregate short positions per issuer for public disclosure, while highlighting that the quality of reports could be undermined by the lack of a “golden source” for firms calculating ISC.
Our members also support the proposal to publish a positive list of reportable shares rather than an exempt shares list.
EPTA takes note of the proposals to retain cover requirements, with some additional guidance on the expected level of certainty for securing locates and subscription rights. Members warn that going beyond the “reasonable expectations” principle – an internationally accepted standard – would raise cost by effectively creating a “pre-borrow” market for locates.
Noting the FCA’s Statement of Policy on hypothetical use of emergency intervention powers, EPTA also cautions about the detrimental impact of interventions on market certainty and predictability.
Read full consultation here.