Australia lifts shorting ban for financial stocks

The Australian Securities and Investment Commission (ASIC), the country’s securities regulator, lifted its short-selling restrictions for financial securities on Monday, but said it would not hesitate to reintroduce the ban if market conditions required.
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The Australian Securities and Investment Commission (ASIC), the country’s securities regulator, lifted its short-selling restrictions for financial securities on Monday, but said it would not hesitate to reintroduce the ban if market conditions required.

The original short-selling restrictions were introduced for all stocks on 21 September 2008, in response to deteriorating market conditions following the collapse of US investment bank Lehman Brothers.

The ban was lifted for non-financial securities on 19 November. A curb on the short-selling of financial securities was due to remain until 31 May 2009, although ASIC said this would be kept under constant review.

ASIC said in a statement that it had reviewed market conditions and “considers that the balance between market efficiency and potential systematic concern has now moved in favour of the ban being lifted”.

However, the regulator added that it and the Australian Securities Exchange (ASX), the country’s main stock exchange, will continue to monitor the market and will re-impose the ban if the global recession continues to put pressure on Australia’s financial system.

Market participants will also be required to continue reporting gross short-sales to the ASX on a daily basis until the introduction of the Australian government’s permanent disclosure measures. ASX recently implemented an integrated trading system, which allows participants to automate their reporting of short-sales to the ASX. The new system is already available but reporting will remain manual until automatic reporting becomes mandatory.

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