Shorting No Go, Covered Or Not
The Age
Wednesday October 22, 2008
THE Australian Securities and Investments Commission has extended its ban on short-selling, citing "still fragile" markets, despite industry criticism of the unprecedented action and questions over whether the ban has been effective.
ASIC chairman Tony D'Aloisio said that while action taken by the Australian Government and its global counterparts was "positive" it has yet to work its way through the financial system."The financial markets are still fragile, so we feel the reopening of covered short sales should be done in stages and in a measured way over an extended period and have regard to systemic issues, particularly for financial stocks," he said.ASIC said the ban on covered short-selling had been extended another 28 days, until November 18, "when it expected the ban would be lifted".The ban on covered shorting of financial stocks has been extended to January 27. ASIC said that while the US had lifted its bans on short-selling, Britain had kept its ban on the shorting of financial stocks.The ban on naked short-selling will remain until the Government introduces legislation next year governing the practice and disclosure of short-selling. The draft legislation was open for public comment until yesterday.Despite the introduction of the bans last month, the sharemarket plummeted to new depths.The Australian arm of the hedge fund industry body, the Alternative Investment Management Association, condemned the extension."The original aim of the ban was to reduce volatility in the markets and this has clearly failed," AIMA chairman Kim Ivey said. "We question ASIC's rationale for keeping the ban."He noted that the market fragility related more to overseas markets, where bank bail-outs had been necessary, and said that the Australian ban had actually created more volatility due to "a vacuum of buying".ASIC said it expected to announce new disclosure guidelines and reporting arrangements governing short-selling next week.
© 2008 The Age
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