ASIC extends hedging relief for market makers
The Australian Securities and Investments Commission (ASIC) has granted extended relief for market makers wishing to hedge risk by short selling securities.
Naked short selling will now be allowed on securities in the S&P/ASX300 index, where it was previously restricted to those that appeared in the S&P/ASX200 index.
ASIC stated that while naked short selling is prohibited in the Corporations Act, licensed market makers have been afforded relief in order to allow them to mitigate the risks involved in their activities.
A condition of the relief is that market makers must have reasonable grounds to believe securities lending arrangements can be put in place to allow delivery and market makers acquire or borrow sufficient products by the end of the day to ensure they can deliver all products sold at the time delivery is due.
For the additional 100 stocks in the S&P/ASX300, ASIC stated that it believes the liquidity ease with which the market makers can cover short positions are broadly in line with the S&P/ASX200 index.
Hence, it anticipates this change in rules will have little impact, with sufficient investor and market protections in place.
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