Thinking | 25 May 2009

Ban on short selling securities lifted from 10am today

The Australian Securities and Investment Commission (ASIC) has announced it would lift the current ban on covered short selling of financial securities from 10am today. Following a review of the market conditions, ASIC considers that the balance between market efficiency and potential systemic concern has now moved in favour of the ban being lifted.

ASIC notes that the global financial crisis and global recession continues to place pressure on Australia’s markets and it will not hesitate to reimpose the ban immediately and without consultation if it considers market conditions warrant such action. ASIC and the Australian Stock Exchange (ASX) will be monitoring the market, paying particular attention to short selling activity by participants which could potentially harm Australia’s financial system.

The daily reporting by market participants to ASX of gross short sales will continue as will the publication to the market of aggregate short sales the day after trading (until the commencement of the Government’s permanent disclosure measures).

ASIC noted that ASX has been working on implementing its software capability to support real-time tagging of short sales in the Integrated Trading System (ITS). This will make reporting by market participants more efficient by automating the reporting of short sales to the ASX. The software was available from Monday 18 May 2009. However, manual reporting of total daily gross short sales will continue until tagging becomes mandatory under ASX’s Market Rules. Market participants should refer to ASX’s ITS Circulars for more information.

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The regulation of margin lending, trustees and debentures will take the form of amendments to the Corporations Act 2001 and Corporations Regulations 2001.
A brief description of the proposed amendments for each topic is set out below.