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Short sellers betting on a fall in a UK company’s share price will no longer have their identities disclosed in public, under rules set to be announced by the financial watchdog on Tuesday.

The Financial Conduct Authority is expected to shift to publishing the total short positions of investors betting against a company’s share price on an anonymised and aggregated basis, according to two people briefed on the decision.

The UK could make the change because it is no longer bound by EU rules requiring all short positions above 0.5 per cent of a company’s share capital to be disclosed publicly.

The planned lighter disclosure regime will bring Britain more in line with the US, which only discloses short positions in aggregate without revealing the identity of those holding them. 

The FCA is also expected to water down the rules on when short sellers have to privately inform the regulator about their positions by raising the threshold from any that are above 0.1 per cent of a company’s share capital to those higher than 0.2 per cent.

The regulator, which declined to comment, is likely to present the changes as part of its response to calls by the government to lighten the burden of its rules in support of UK economic growth and competitiveness. The move is set to be applauded by hedge funds.

However, there are fears that less transparency on short selling activity could make it easier for hedge funds to manipulate markets or make profits at the expense of market stability.

“It beggars belief that policymakers would look to water down the supervisory regime for short selling further,” said Simon Youel, head of policy and advocacy at campaign group Positive Money. 

“Short selling can serve useful functions in theory, but in practice it is too often abused cynically by hedge funds to juice returns in ways that at best add no economic value, and at worst amplify risks for the wider public,” said Youel, also a visiting research fellow at the University of Manchester.

But financiers believe the reforms will boost the UK’s appeal as a global financial centre. “Smart reforms will enhance UK financial markets, attract investment and support economic growth,” said Rob Hailey, head of Emea government affairs at the Managed Funds Association, which represents hedge funds. “We will continue to pursue similar enhancements to the EU’s short sale framework.”

One US observer said the changes were unlikely to help UK investors. “Eliminating the disclosure of the identity of short sellers will likely result in increased short selling activity, but who would that benefit?” said Dennis Kelleher, head of US-based investor advocacy group Better Markets. “More financial activity often leads to bubble growth, not economic growth that benefits the real productive economy.”

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The Treasury set the stage for the change with legislation introduced in January that replaced a law the UK inherited from Brussels.

Britain has already scrapped restrictions on “naked” short selling of sovereign bonds that prevented investors from taking a short position without borrowing the underlying bonds. But the FCA is expected to maintain the ban on “naked” short selling of shares.