Naked short-selling banned in Australia

The Australian Securities and Investments Commission (Asic), the country’s main financial watchdog, today effectively banned naked short-selling – selling securities without borrowing them first – from September 22 until further notice.

Asic also clarified the circumstances under which short selling is allowed, and has introduced reporting requirements through the Australia Securities Exchange (ASX).The move comes in the wake of a decision by the UK Financial Services Authority yesterday and the US Securities and Exchange Committee today to temporarily suspend short selling on financial stocks.Following Asic’s ruling, ASX will remove all securities from its approved short sale products list – the list of stocks approved for naked short selling – effectively meaning most short sales must now be covered.The decision will be reviewed when the Australian government’s already-announced legislative amendments to increase disclosure by traders borrowing stock for short selling are made.ASX formerly allowed naked short selling in securities on the approved short sale products list, subject to certain limitations – notably, a 10% cap on the total number of securities that could be naked short sold. Traders were also banned from making a short sale at a price lower than the previous sale price and had to comply with real-time reporting requirements.

 

See also:

SEC and FSA ban short selling on financials