Short-selling ban finally lifted

The Australian Securities and Investments Commission (ASIC) has lifted its almost nine-month ban on covered short selling but has declared that it would not hesitate to reinstate the ban if market conditions dictated such a move.

The ban was effectively lifted from 10 o’clock this morning, and prompted attention to be turned to the trading in equities of a number of companies considered vulnerable to short selling including Macquarie .

In announcing that it had decided to lift the ban, ASIC said it had reviewed market conditions and considered that the balance between market efficiency and the potential systemic concern had now moved in favour of it being lifted.

In reaching this view, however, ASIC noted that the global financial crisis and global recession continued to “place pressure on Australia’s markets”, the announcement said.

“ASIC will not hesitate to reimpose the ban immediately (using its enhanced and clarified powers under the Corporations (Amendment) Short Selling Act 2008) and without consultation if it considers market conditions warrant such action.”

The regulator said that in its monitoring of the market along with the Australian Securities Exchange (ASX), it would pay particular attention to short-selling activity by participants (including activity by hedge funds and similar institutions) that could potentially harm Australia’s financial system.

ASIC said that the daily reporting by market participants to the ASX of gross short sales would continue as would the publication to the market of aggregate short sales the day after trading and that this disclosure regime would operate until the commencement of the Government’s permanent disclosure measures.