The Australian Securities Exchange Clarifies and Reinforces Existing Obligations in Relation to Short-Selling
Australian Securities Exchange
The Australian Securities Exchange (ASX) is addressing transparency and settlement risk issues associated with short-selling of listed securities in several ways. These issues are more acute in times of market volatility. In the current environment, ASX takes this opportunity to remind market participants of the requirements existing under a combination of current legislative provisions and ASX market rules.
Short-selling plays a useful role in contributing to market efficiency in a developed financial economy. Any obligations placed on brokers need to contribute to that efficiency or otherwise address clearly identifiable regulatory objectives.
Transparency of the amount of what is commonly referred to in the market as “naked” and “covered” short-selling activity is important for market users to inform their trading decisions. A “naked short sale” for this purpose is where the participant, either proprietary or on behalf of a client, enters an order in the market and does not have in place arrangements for delivery of the securities. A “covered short sale” for this purpose is where the participant, either proprietary or on behalf of a client, enters an order in the market and does have in place arrangements for delivery of the securities, typically, by borrowing the relevant securities.
