Home FCA Handbook SSR SSR 5 SSR 5.19 Guidance on market making activities that fall within paragraph (c) of the Glossary definition of market making activities: hedging
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SSR 5.19 Guidance on market making activities that fall within paragraph (c) of the Glossary definition of market making activities: hedging

13/07/2026G

To qualify for the market maker exemption for hedging activities within paragraph (c) of the Glossary definition of market making activities for the purposes of SSR, either: 

  1. (1) the size of the position acquired for the purpose of hedging should be proportionate to the size of the exposure hedged; or
  2. (2) if the size of the position acquired for the purpose of hedging is not proportionate to the size of the exposure hedged, the person relying on paragraph (c) of the Glossary definition of market making activities should be able to justify, upon request from the FCA, why an exact match is not possible,
  3.  and, in both cases, any discrepancy between the size of position acquired for the purpose of hedging and the size of the exposure hedged should be insignificant.
13/07/2026G

In the context of undertaking market making activities within paragraph (c) of the Glossary definition of market making activities, persons may undertake short selling activity in admitted shares to:

  1. (1) hedge risk from their market making activities in the same or in a different share for which the FCA has made a determination under SSR 4; or
  2. (2) hedge risk from their market making activities in other financial instruments (such as equity derivatives or bonds related to that share).

Anticipatory hedging

13/07/2026G
  1. (1) A person dealing as principal in anticipation of client orders or requests expected to materialise in the near term can benefit from the market maker exemption to the extent that the anticipated hedging is necessary for the performance of actual market making activities and is not carried out on other grounds, such as speculative trading.
  2. (2) Should the anticipated client orders or requests to quote not be received, the position accumulated through anticipatory hedging should be unwound in an expeditious and orderly manner (and in any event as soon as practicable).  
13/07/2026G

The market maker must be able to demonstrate to the FCA on request that trading in anticipation of client orders or requests correlates with transactions carried out in performance of market making activities at any time.