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ARTICLE · 03 NOVEMBER 2008

ASIC’s Position On Short Selling

The continuing effects of the global financial crisis have resulted in what some have called unprecedented turmoil in financial markets. Some of the volatility in stock markets has been blamed on short selling.

AustraliaCorporate/Commercial Law
Jamie Motum
Jamie Motum

The continuing effects of the global financial crisis have resulted in what some have called unprecedented turmoil in financial markets. Some of the volatility in stock markets has been blamed on short selling.

Short selling is an activity whereby an entity enters into an agreement to sell a security that it does not currently own. A 'covered' short sale occurs when the seller has arranged to borrow the security in order to meet their delivery obligations prior to entering into the agreement to sell the security. A 'naked' short sale occurs when the seller has not arranged to borrow the security it intends to sell at the time of the sale, but intends to do so later to meet its delivery obligations. In response to foreign jurisdictions imposing emergency restrictions on short selling, ASIC has acted promptly to protect Australia's position by banning short selling for 30 days from 22 September. In the interim, ASIC has issued a number of class orders providing for

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