Financial Conduct Authority faces scrutiny over short-

The Financial Conduct Authority (FCA)’s new short-selling rules, largely implemented on July 13, 2026, have faced immediate scrutiny following apparent errors in their first batch of data disclosures. Released on July 18, 2026, this initial information has prompted leading market participants to question the accuracy and reliability of data crucial for tracking bets against UK-listed companies.

Data provider Breakout Point, its founder Ivan Cosovic, law firm Dentons partner Chris Brennan, and the Financial Times have all highlighted discrepancies. These issues cast a shadow over the regulatory body’s revamped approach to market oversight.

early concerns plague new short-selling data release

Analysis by data provider Breakout Point, later reviewed and confirmed by the Financial Times, revealed several critical flaws in the FCA’s initial disclosures. These included short positions that appeared to be changed or entirely removed without any explanation.

There were also instances of duplicate entries and some short bets dating back years that seemingly remained active despite their age. Such inconsistencies undermine the confidence traders and analysts place in official market data.

For example, short positions against FTSE 250 software company Softcat showed up in Monday’s report but then vanished from Tuesday’s update. Crucially, they weren’t listed as closed, creating confusion for market watchers. Similarly, the updated data for four other companies, including student accommodation provider Unite Group, displayed different dates and position sizes.

Yet, the regulator offered no recorded adjustments to explain these changes. A source familiar with the situation told the FT that at least one amendment corrected a duplicated short position.

what the new UK short-selling rules entail

The FCA’s updated UK short-selling rules represent a significant overhaul, replacing the previous regime based on assimilated EU law. These new regulations, now part of the FCA Handbook as the Short Selling Rules (SSR) sourcebook, aim to foster orderly markets while easing regulatory burdens.

Under the new framework, the FCA no longer publishes individual net short positions held by specific firms. Instead, it releases anonymised aggregate net short positions (ANSPs) for each stock. This occurs once the total short interest reaches 0.2 per cent of a company’s shares.

streamlining disclosure and reporting

The previous requirement mandated individual public disclosures at a 0.5 per cent threshold. Now, firms must still notify the FCA when a net short position reaches or exceeds 0.2 per cent, falls below this figure, or changes by 0.1 per cent increments.

The reporting deadline has been extended, giving firms until 11:59 PM on the working day following the trigger event. This change aims to provide more flexibility for market participants.

Additionally, the FCA has introduced a positive Reportable Shares List (RSL), effectively a definitive list of shares subject to these reporting requirements. This allows market participants to clearly identify in-scope shares, with the first live RSL taking effect on July 13, 2026.

safeguarding market integrity

Rules requiring firms to cover their short sales remain a central tenet of the new regime. Companies must have borrowing, agreement-to-borrow, or locate arrangements in place before a short sale of an in-scope admitted share.

They must retain evidence of these arrangements for five years, reinforcing measures against naked short-selling. Furthermore, UK sovereign debt and its associated credit default swaps (CDS) have been removed from the scope of position reporting, though the FCA retains emergency powers over these instruments.

The notification process for market makers has also been simplified. It now involves a single ‘activity-based’ notification, with an annual attestation required to confirm eligibility.

market participants demand data accuracy

For market professionals, the accuracy of these disclosures isn’t just bureaucratic detail; it’s fundamental to their operations. Chris Brennan, a partner at law firm Dentons, underlined this point, stating that information flowing to the FCA is “essential for market oversight and to identify misconduct.”

He added that market users have a “reasonable expectation that what they see published is correct.” These sentiments reflect broader concerns about the integrity of financial data underpinning the market.

Ivan Cosovic, founder of Breakout Point, acknowledged that early issues are “perhaps forgivable,” and improvements are underway. But he stressed that “invisible corrections in an official market record should not become a habit.” This statement highlights the need for transparency, even in the face of initial teething problems.

lingering discrepancies and fca response

The Financial Times also noted that some short positions from the old reporting regime were absent from the new data. Conversely, other short positions, potentially more than five years old, remained listed despite likely being inactive. One such example is a short position in the miner Critical Mineral Resources, initially disclosed in 2021.

Its shares have plummeted by 87 per cent since then, a scenario that would typically prompt a short seller to close their position and take profits. The continued listing of such positions adds to the data’s questionable accuracy. This suggests that the process for cleaning up historical data might be lacking.

The FCA, however, maintains that its data is accurate. They informed the Financial Times that after reviewing the specific examples highlighted by Breakout Point, they found “no need for any revisions” to the published information. This firm stance has done little to assuage critics.

The regulator’s position is that these disclosures rely on data submitted by investors themselves. They reportedly contact firms as needed to verify if older positions are still valid. Yet, the persistent errors suggest the verification process isn’t catching all issues.

broader regulatory landscape and fca’s challenges

These challenges with short-selling data arrive amidst a busy period for the Financial Conduct Authority. The regulator has recently advocated for expanded powers to oversee artificial intelligence in finance, highlighting the rapid technological shifts impacting the sector. They believe the UK’s financial rulebook must adapt swiftly to these changes.

Regulating emerging technologies, including the use of chatbots for financial advice, presents its own set of complexities. This push for new authority underscores the FCA’s recognition of the evolving supply chain resiliency and broader digital economy. But it also shows how regulators are struggling to keep pace.

The simultaneous scrutiny over data integrity in traditional market oversight and the call for new powers in AI regulation illustrate the immense pressure on the FCA. Maintaining accurate and transparent data is crucial for all forms of financial markets, old and new.

what comes next for the short-selling framework

The rollout of the FCA’s new short-selling rules is a phased implementation, with further developments expected in the coming months. Phase 1, which included the new FCA rules and the Reportable Shares List (RSL), took effect on July 13, 2026. This initial phase brought the public disclosure of anonymised aggregate net short positions.

Phase 2 is scheduled for November 30, 2026, and will introduce bulk reporting. This will allow firms to submit multiple notifications to the FCA using a CSV file. The aim is to streamline the reporting process for high-volume traders, potentially reducing administrative burden.

upcoming guidance and future reviews

Before the bulk reporting phase, the FCA plans to release an updated ESS user guide and a training video. These resources are expected by September 30, 2026, designed to assist firms in navigating the new reporting mechanisms efficiently. Effective guidance will be critical for a smooth transition.

There’s also a transitional period for existing market makers to re-notify the FCA, which concludes on January 29, 2027. This ensures all market participants are operating under the updated framework. The regulator also has a long-term plan for the RSL.

The first full review and update of the Reportable Shares List is scheduled for April 1, 2028. This periodic review will ensure the list remains current and relevant, adapting to market changes. But the immediate focus remains on addressing the present data accuracy concerns to build trust in the new system. The integrity of financial data is paramount for all market operations, including innovations like those involving Ethereum and Solana in the crypto space.

The efficacy of these new rules hinges on the precision of the data they generate. Without reliable figures, traders and other regulators find it hard to properly assess market sentiment or detect potential abuses. This makes the initial errors a significant setback for the Financial Conduct Authority.