ID :
20468
Mon, 09/22/2008 - 09:43
Auther :

ASIC extends ban on short-selling

(AAP) - The corporate regulator has extended its ban on the short-selling of shares to bring the Australian share market into line with global peers and to curb excessive market volatility.

Short-selling is where investors sell a share they do not own in the expectation of
buying it later at a lower price and thereby making a profit.
Short-selling has been partly blamed for the recent sharp falls of stocks such as
Macquarie Group Ltd.
On Friday, the Australian Securities and Investments Commission (ASIC), in
consultation with the Australian Securities Exchange, placed a ban on naked
short-selling, effective from Monday. The ban will now be extended to covered
short-selling.
Naked short-selling involves selling without first borrowing the stock, or even
ensuring they can be borrowed.
Covered short-selling is where the seller has borrowed the shares they are selling.
"The measures being taken by ASIC are an appropriate response to global financial
market turbulence," federal Treasurer Wayne Swan said.
"They will help protect investors as well as the integrity of our financial markets."
ASIC said that since its announcement on Friday, it had continued to assess moves by
other international regulators in relation to short-selling.
ASIC said the United States and United Kingdom moved late last week to ban covered
short sales in financial stocks and had been followed by France, Germany,
Switzerland, Ireland and Canada.
Other regulators are assessing their responses.
"These developments which, in effect, restrict short-selling activity in these
markets, intensify the risks on the Australian market," ASIC said.
"Put simply, because global funds can move quickly, the risk of unwarranted activity
on the Australian market has intensified.
"This intensity has been assessed by ASIC in the context of the small size, relative
to other markets, of the Australian market and the structure of our market."
ASIC said it had therefore decided to ban covered short sales for all listed stocks
from the opening of the market this week.
The corporate regulator said it would reassess the ban and advise the market in 30
days whether or not it would re-open covered short sales for non-financial stocks.
"These measures are necessary to maintain fair and orderly markets in these
exceptional times of global crises of confidence in financial markets," ASIC chief
Tony D'Aloisio said.
"Because of the relatively small size and the structure of the Australian market, it
is necessary to extend the prohibition to all stocks.
"To limit the prohibition to financial stocks, as has been done in the UK, could
subject our other stocks to unwarranted attack given the unknown amount of global
money which may be looking for short sell plays."
ASIC said there was a legitimate place for short-selling in markets, but in the
current climate and in light of the actions taken by other regulators, a circuit
breaker was needed to help maintain and restore confidence.
"Our measures do that as they will operate for a limited time and in the case of
non-financial stocks, will be reviewed in 30 days," he said.
"In the case of financial stocks, the review will be in line with the time limits
imposed by other international regulators such as the US and UK."

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