Greetings,

Big news out of the UK this week, with the Financial Conduct Authority saying it will no longer publish the identities of short sellers. The change, which aligns UK rules more closely with US practices, has been welcomed by hedge funds but might face criticism from institutional investors regarding reduced transparency.

Here's what else we're following this week:

• US Treasury, IRS to clarify sourcing for securities-loan fees
• Short sellers adapt to bull market with mixed strategies
• Global finance at a digital crossroads: stablecoins or CBDCs?
• Financial firms see operational benefits in tokenization

... and more.

The UK Financial Conduct Authority has confirmed it will stop publishing the identities of short sellers as part of a broader effort to reduce regulatory burdens and enhance competitiveness. The FCA will now only release anonymized, aggregate net short positions, aligning the UK more closely with US practices. The Managed Funds Association supports the move, saying it will attract investment and support economic growth.

The Treasury Department and the IRS plan to propose regulations clarifying the sourcing of "borrow fees" for securities-lending and sale-repurchase transactions. The rules will specify that the fees should be sourced based on the residence of the recipient.

The Federal Reserve has unveiled the mechanics behind its stress tests for large banks, marking a major shift in transparency. The Fed board voted 6-1 to advance the changes, which include the release of hundreds of pages of documents detailing the models and methodologies used. This move is a response to long-standing complaints from major lenders about the opacity of the tests and a legal challenge from the banking industry.

Short sellers are employing different tactics to survive in a prolonged bull market. Some have found success by balancing long and short positions, but the overall environment remains challenging, with many short targets rising significantly after initial drops.

The US, Europe, and China are pursuing diverging paths in digital money, with Washington backing privately managed, dollar-linked stablecoins while the ECB and PBOC push state-backed digital currencies. The clash reflects a wider geopolitical struggle over financial control, as stablecoins bolster US dominance and CBDCs aim to secure national monetary sovereignty.

The European Securities and Markets Authority has emphasized the importance of cybersecurity and digital resilience as strategic supervisory priorities, aligning with the Digital Operational Resilience Act. ESMA has urged national competent authorities to continue efforts in these areas through 2026 to ensure effective supervision across the EU. ESMA also has highlighted the progress made in environmental, social and governance disclosures since 2022 and plans to focus on high-risk areas next year.

The Global Financial Markets Association, SIFMA's global affiliate, has warned that the financial sector faces a "narrowing window" to strengthen defenses against quantum computing threats, which could eventually break current encryption standards. GFMA said regulators may need to "nudge" firms toward post-quantum security, particularly for critical systems like payments infrastructure, even before risks become material in the 2030s.

Financial firms are increasingly embracing tokenization, with custodians leading the way, asset managers gaining momentum and wealth managers preparing to follow, according to a recent Broadridge report. More than 50% of early adopters cite lower operational costs as a key benefit, while more than 80% recognize the potential for enhanced client engagement and operational simplification through direct distribution. However, 73% of respondents cite regulatory uncertainty as a major concern.

The Global Legal Entity Identifier Foundation has opened a representative office in the Shanghai Lin-gang Special Area to meet growing demand for Legal Entity Identifiers and verifiable LEIs in China. This office will work closely with financial authorities, enhance the LEI infrastructure and support digital trade initiatives, and follows China's efforts to integrate LEIs into payment systems and digital certificates.

SAB Invest, a subsidiary of Saudi Awwal Bank has joined the International Securities Lending Association, marking a strategic move to connect with a global network dedicated to advancing the securities lending industry.

Al Rajhi Capital has become a member of the International Securities Lending Association, furthering its role in Saudi Arabia's Vision 2030. The Riyadh-based firm, a subsidiary of Al Rajhi Bank, specializes in brokerage, asset management and investment banking.

Nuam has joined the International Securities Lending Association Americas as a member, enhancing the association's presence in Latin America. Nuam integrates the Santiago, Lima and Colombian stock exchanges to create a more liquid market. "Your presence strengthens our collective voice in the securities lending industry, and we are particularly excited about the innovation and perspective you bring from the Latin American markets," ISLA Americas CEO Fran Garritt says.