The ASX has received a number of submissions following its request for public consultation on the contentious issue of Short Selling, and in particular the practice of "naked shorts" according to an article in todays Financial Review.

The issue has been a hot potato following recent significant market falls in many stocks, including high profile cases such as Centro Properties, Allco Finance and ABC Learning, which prompted calls from some quarters for all short selling to be outlawed, and resulted in the federal government promising to introduce legislation to at least control or limit the practice.

In particular submissions from the Securities & Derivatives Association, representing stock brokers and investment banks, and Chartered Secretaries Australia, representing governance professionals, have both called for reviews of the rules and activities surrounding short selling.  However, neither submission proposed that short selling should be banned per se, but that the practice overall should be subject to review and greater control - particularly naked short selling (selling shares not owned, and not providing borrowed stock to settle trades) 

Australian Fund Monitors agrees the whole area of short selling should be reviewed and if necessary more fully regulated to recognise the changing nature of the industry and various derivative products which are now used.  However the main issue we believe is transparency - which should also include increased transparency to cover margin lending (as called for by the Institute of Actuaries in their submission to the ASX), which has also been blamed for significant market falls in recent months.