ASIC provides relief on ETF short-selling

The Australian Securities and Investments Commission (ASIC) has provided relief and guidance on short-selling, through an instrument that will allow exchange-traded fund (ETF) market makers to make named short sales in ETF and managed funds.

The legislative relief for ETF sellers would be applicable in the course of making a market in units in those funds, provided they meet additional conditions outlined in RG 196.46 which had not previously been included in the ASIC’s no-action letters.

“This legislative relief facilitates market making which provides benefits of liquidity to the market. The settlement risk is low because the market makers have the ability to apply to the fund issuers for the creation of new fund units in time for the settlement of any short sales,” the regulator said upon announcing the instrument.

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“Since 2008, ASIC had given individual no-action positions to allow market makers of certain exchange-traded products to make naked short sales. We now consider that it is an appropriate time to provide this as legislative relief.”

The instrument would also provide relief or modifications on deferred settlement trading, initial public offering sell-downs, and an option for global firms to calculate their short positions as at a global end calendar time.

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