Short Selling Guide UK

Short selling guide UK investors can profit if a stock or commodity falls in value. However, it can be a risky strategy that should not be attempted by novice investors. In this article we will look at some important considerations and the best UK brokers for trading in this area.

The government is proposing to relax the rules governing short selling in the UK. Currently funds have to publicly disclose their net short positions on shares in UK companies. This is because of concerns that a large number of short sellers might be inflating share prices and depressing real economic growth.

Under the proposals, funds will still have to disclose their positions but the threshold at which they have to do so would increase. They will have to notify the FCA when their individual net short position in a stock exceeds 0.1% of the company’s share capital. This threshold will also rise each time it increases above that figure.

The new rules will also alter the way in which certain types of shares are exempt from short selling regulations. The FCA will move away from a ‘negative exemption-based’ list to one that will only exclude shares where there is a particular concern that short selling could cause market distortion. It will also introduce “circuit breakers” or “tick rules” to halt trading in some shares when they rise or fall by more than a pre-set amount. In our opinion this is a step in the right direction but it should not lead to a complete ban on short selling.

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