The Australian Securities and Exchange Commission (Asic) lifted its ban on covered short selling on May 25, just over seven months after it was originally imposed.
Asic said in a statement that "the balance between market efficiency and potential systemic concern has now moved in favour of the ban being lifted". Nonetheless, the regulator warned that it would not hesitate to re-impose the ban if necessary.
Asic will continue to require dealers to report gross short sales to the Australian Securities Exchange (ASX) and aggregate short sales to the market the day after trading. However, Asic stated it wishes to move towards a system of tagging short sales, which would then be automated to the ASX.
Asic is the latest in a series of regulators to lift a ban on short selling: Greece's Hellenic Capital Markets Commission lifted its ban on May 15 and South Korea's Financial Markets Commission allowed the short selling of non-financial stocks from May 20. Bans in the US and Canada expired in October 2008, while the UK's ban ended on January 16. Other bans - including ones imposed by Italy's Consob and Germany's Bundesanstalt für Finanzdienstleistungsaufsicht - are set to expire on May 31.
The wave of short selling bans came in the aftermath of Lehman Brothers filing for Chapter 11 bankruptcy protection on September 15. With financial stocks in freefall, there was concern in the market that short sellers - who borrow a stock, sell it with the view that it will depreciate in value, before buying it back at the lower price to realise a gain - might be driving down share prices even further. The UK's Financial Services Authority and Canada's Ontario Securities Commission led the way, imposing bans on September 18, 2008, while Asic imposed its own ban on September 21, 2008.
More on Infrastructure
US regulatory concerns about liquidity of government securities collateral could be resolved by access to the Fed’s discount window, CCP officials say
High-frequency traders have been viewed with suspicion for some time. Now critics claim exchanges are conspiring with the traders to develop tools that benefit them and disadvantage ordinary investo...
The benefits of local trade repositories outweigh the possible disadvantages of multiple reporting requirements, says executive director of HKMA’s financial infrastructure unit
Sign up for Risk.net email alerts
Sponsored video: MarketAxess
Sponsored video: Tradeweb
Multifonds talks to Custody Risk on being nominated for the Post-Trade Technology Vendor of the Year at the Custody Risk Awards 2014
Sponsored webinar: IBM Risk Analytics
There are no comments submitted yet. Do you have an interesting opinion? Then be the first to post a comment.