Short-Selling: Potential Dual-Reporting Requirement for Dual-Listed UK/EU Shares

For the purposes of reporting to EU regulators under the EU Short Selling Regulation (“EU SSR”), the UK became, as of 1 January 2021 and the end of the Brexit transition period, a ‘third country’. Shares that have their principal trading venue in a third country are typically listed on ESMA’s list of ‘Exempted Shares under Short Selling Legal Framework’ and these shares are exempt from reporting under the EU SSR. 

ESMA has advised that it is in the process of updating this list to reflect the UK’s withdrawal from the EU (and presumably the fact that a number of UK shares will now be exempt from reporting under the EU SSR). In the meantime, the list of exempted shares published before the UK’s withdrawal remains valid. 

This means that a number of UK shares that have their principal trading venue in the UK (or other third country, with a UK listing) and are dual-listed in the EU will (at least until ESMA updates its list) be reportable under the EU SSR to the relevant EU regulator of the country in which the shares are dual-listed, as well as being reportable to the FCA. 

Do I need to report under the EU or UK Short Selling Regulation?

If in doubt as to whether a share is reportable under the EU SSR, firms should check the relevant ISIN in ESMA Financial Instruments Reference Data System (“FIRDS”) to determine the responsible national competent authority (or “upcoming Relevant Competent Authority (“RCA”)”) for any UK shares with a dual listing in the EU. If the share does not appear on this list, and the firm has a reportable net short position in that share (currently 0.1% under EU SSR), the firm should report to the upcoming RCA for that share, as shown on ESMA FIRDS. 

The approach will be similar for some EU shares under the UK Short Selling Regulation (the Short Selling (Amendment) (EU Exit) Regulation 2018) (“UK SSR”). Where a firm has a net short position in an EU share (0.2% until 1 February, and 0.1% thereafter under UK SSR), this should be checked against the UK list of exempted shares (as published on the FCA’s website, here). If the ISIN  of the relevant share is not listed there and the share shows the FCA as the upcoming RCA on the FCA FIRDS , the position will be reportable to the FCA, as well as to the relevant upcoming RCA as listed on ESMA FIRDS. 

Note that the potential need to dual report under EU SSR and UK SSR is driven by incomplete data. This will present a headache to many firms, but we expect this to be a temporary ‘blip’ until the data in ESMA and FCA FIRDS is updated.  

ACA Guidance

Firms should review their processes for identifying and reporting under both UK and EU SSR regimes.

For further information on this alert, please speak to Ruth Avenell, Martin Lovick or your usual ACA consultant at +44 (0)20 7042 0500.

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