The federal government has presented a revised bill to parliament which will permanently ban naked short selling. An interim ban on all forms of short selling (with certain exceptions) has been in place since 21 September 2008 but ASIC has announced, as planned, it will lift its ban on the short selling of non-financial stocks from 19 November 2008. The ban on covered short selling of financial stocks remains in place until the 27 January 2009.
In conjunction with this legislation the industry regulator ASIC, together with the market body ASX, has outlined the reporting and disclosure framework for the practice of covered short-selling. There has been much discussion in the media that this framework is inadequate in that it only requires the reporting of daily gross short sales. In effect this will not indicate the aggregate number of short sold positions with the buy-back of stock to close out the short positions being taken into account.
In relation to this issue, the Australian arm of the Alternative Investment Management Association (AIMA) has stated that: "Interim measures designed to only capture daily trade data will give no transparency into the size of the short interest in a listed company, or the rate of change in the short interest. Reporting small daily trade data will significantly distort the actual shorting activity in a company's stock as it fails to disclose position size and its implied impact on the stock's price behaviour."
To read the full ASIC Statement, click here.
