FCA Handbook - SSR 2.17 Requirements for calculating net short positions held through ETFs, baskets and indices

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SSR 2.17 Requirements for calculating net short positions held through ETFs, baskets and indices

(1) Subject to SSR 2.17.4R, any transaction that confers a financial advantage in the event of a change in the price or value of an admitted share held as part of a basket, index or ETF must be included when calculating the position in the admitted share.
(2) Positions in these financial instruments must be calculated taking into account the weight of that share in the underlying basket, index or ETF.

When calculating net short positions in shares held indirectly by a person through baskets, indices, or units of an ETF, a person must act reasonably having regard to publicly available information on the composition of the relevant index, the basket of securities or the interests held by the relevant ETF.

(1) The person is not required to obtain real-time information on the composition or weightings of an index, basket of securities or ETF, to the extent that it is not readily accessible free of charge.
(2) Persons should instead use the most recent publicly available information for look-through purposes. Such information, notably on indices, is generally available free of charge when provided with a certain delay.

Where a person holds units of an ETF which is managed on a discretionary basis, that person is not required to account for positions in the shares held as part of that ETF as these will be included in the calculation and notification performed by the management entity that has made the relevant investment decisions in accordance with SSR 2.15.1R.

Where a person holds units of an ETF which is managed on a passive basis, that person is required to account for the positions in the shares held as part of that ETF.

In accordance with SSR 2.17.5R, where an ETF is managed on a passive basis, the person holding the units in the ETF, and not the manager, is treated as having made the relevant investment decision in the underlying shares.

Where a person makes an investment decision to short sell units of an ETF so as to adopt a contrary position to that of persons holding units of the ETF, that person is required to account for the resulting position when calculating their net short position, regardless of whether the ETF is managed by a management entity.