By ‘shorting’ a stock, traders speculate that the share price will fall. The process involves borrowing shares from a broker, selling them straight away, and then repurchasing them later at a lower price to return them to the lender (so making a profit). Investors can also short a range of other assets such as currencies, commodities, indices and interest rates through CFD or spread betting trading. How to Short Stocks UK.

Despite the recent reputational damage, some research suggests that shorting is an essential part of an efficient market, providing evidence that stocks may be overvalued. However, the practice can be abused by speculators trying to exploit vulnerable firms or manipulate the market. For example, George Soros famously shorted East India Company stock in 1772, precipitating the collapse of several major banking houses and triggering a financial crisis across Europe that was known as Black Wednesday.

Shorting Stocks in the UK: A Beginner’s Guide to Profits and Pitfalls

In a significant change, the new U.K. regime delegated to the FCA the power to make rules requiring public disclosure of net short positions in UK-listed shares, with thresholds above which firms must notify the FCA. This replaces the existing requirement to publish a negative list of shares exempt from the main short-selling rules and the requirement to publish a list of all short positions above 0.5%.

In addition, the revised regime includes a broader definition of the ‘market’ to cover all European markets. This reflects the EU position that all shares traded on a market are subject to the short-selling rules, but excludes non-EU markets which have been granted equivalence under the existing U.K. regime under the Short Selling Regulation Equivalence Directions 2020.