Hedging relief for market makers
The Australian Securities and Investments Commission (ASIC) has refined the arrangements around naked short selling by issuing a class order that allows short selling to hedge risk from market making activities.
The regulator announced the refinement saying the class order provided market makers with relief in limited circumstances from that section of the Corporations Act dealing with the sale of a security or managed investment product to hedge risk from market making activities.
However, it said the relief contained a number of conditions, including requirements that market makers have reasonable grounds to believe securities lending arrangements can be put in place to allow delivery and market makers to acquire or borrow sufficient products by the end of each day to ensure they can deliver all products sold during the day at the time delivery is due.
ASIC said the class order reflects international regulatory developments, including an International Organisation of Securities Commissions report that recommended short selling regulation allow for efficient market functioning and development.
AUTHOR
Mike Taylor
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