The Financial Conduct Authority's (FCA) revamped short-selling data disclosures have hit a snag, with initial reports revealing a litany of apparent errors in the first batches of data. The issues, which have sparked concerns among traders and regulators reliant on this information, stem from the regulator's shift to reporting total short interest once it reaches 0.2 per cent of a company's shares. According to analysis by Breakout Point - subsequently reviewed and corroborated - several inconsistencies have arisen, including instances where short positions seemingly vanished or were duplicated without being marked as closed.
Breakout Point's findings indicate that some companies, such as FTSE 250-listed software provider Softcat, exhibited inexplicable fluctuations in their reported short interest. In one instance, a significant short position appeared in the data for Softcat on one day before disappearing entirely the following day without any accompanying closure notification. Similar anomalies were noted in reports for Unite Group, a student accommodation provider, where different dates and position sizes were displayed without record of any underlying changes.
The integrity of market data is paramount to maintaining confidence and transparency, with experts emphasising that these disclosures are essential for monitoring trading activity and identifying potential misconduct. Chris Brennan, partner at law firm Dentons, underscored the critical importance of accurate data: “The information flowing into the FCA is vital for market oversight and to detect misconduct. Market users have a reasonable expectation that what they see published is correct.” Ivan Cosovic, founder of Breakout Point, while acknowledging potential excuses for early-day errors, cautioned against making “invisible corrections in an official record a habit”.
Furthermore, concerns have been raised about the omission of previously disclosed short positions under the old reporting regime, as well as the persistence of others dating back over five years that appear unlikely to remain active. For instance, a short position in miner Critical Mineral Resources first disclosed in 2021 remains listed despite the company's shares plummeting by 87 per cent since then - a scenario that would typically prompt a short seller to close their position and secure profits.
The FCA has responded to these concerns by stating it reviewed Breakout Point's examples, concluding there was “no need for any revisions” to the published data. The disclosures are based on information submitted by investors, with the FCA reportedly contacting firms when necessary to verify the validity of older positions. This scrutiny comes as the regulator navigates a busy period, recently advocating for enhanced powers to regulate artificial intelligence and warning that the UK's financial rulebook must adapt to rapid technological advancements.