ASIC has outlined requirements for short selling disclosures that will become effective from the 19 November 2008 when the ban on shorting non-financial securities is lifted.
ASIC said in their statement "the disclosure and reporting arrangements provide additional transparency on the amount of short selling in Australian securities to participants in financial markets, the market regulator (ASIC) and the market operator (ASX). ASIC and ASX will use this data together with information about trading and market positions in traded securities to assist in detecting market manipulation and other non-compliance with existing obligations."
Disclosure Requirements
Clients are required to inform a financial services licensee (i.e. their broker) when a sale order is for a short sale and trading participants are to ensure they have a system in place to record sell orders as follows:
- Long Sale - a sell order from a client where they already own the securities;
- Short Sale - a covered short sale (i.e. in non-financial securities); or
- Exempt Short - a covered short sale which falls under one of the exemptions to the ban (e.g. a qualifying short sale in financial securities, a naked short sale arising from the exercise of exchange-traded options);
Obligations to report short sales that are otherwise allowable under sub-section 1020B(4) of the Corporations Act 2001 are unchanged.
Reporting
Trading participants will report to ASX each business day all short sales, including Exempt Short sales. Initially this will be a daily report submitted by 9:00am capturing all short sales executed up to 7:00pm on the previous trading day.
Market Disclosure
ASX will produce and disseminate a report to the market that will be released after 9:00am each trading day. The report will show, by security, the total volume of short sales executed on the previous trading day. The report will include Exempt Short sales in financial sector securities.
