Smaller swords tend to be rather less effective than larger ones in GURPS (and, indeed, in almost all roleplaying games). This is probably realistic, since despite the additional expense and inconvenience of long blades, people seem to have preferred them right up until the invention of the smallsword. However, shorter weapons do have some advantages which I think might be worth representing, in order to make them more attractive to PCs and increase the variety of weapons available without deliberately hindering your ability to fight.
Add the following note to the thrust attack (only) of the baton, dusack, shortsword, and small falchion: Reduce the penalty for attacking in close combat by -2.
Add the following note to the thrust attack (only) of the cutlass, falchion, jutte, large katar, large quadrens, macuahuilzoctli, sai, and smallsword: Reduce the penalty for attacking in close combat by -1.