On Sunday 21 September ASIC took further emergency action in
response to bans on short selling of stocks imposed by regulators
in other global financial centres. This has had immediate
consequences for hedge funds, with Standard & Poor's Funds
Services putting 57 funds 'on hold' today. The consequences
for market liquidity and efficient price determination and the
ability of many traditional long investors to hedge their risks
will be significant.
These steps were taken, in ASIC's words, "to maintain
fair and orderly markets in these exceptional times of global
crises of confidence in financial markets"1.
Whether the regulation will ultimately have the desired effect
is the subject of considerable debate. The hedge fund industry has,
for example, responded to equivalent restrictions imposed in the UK
with the statement that, the ban will merely "allow a false
market to persist with an overvalued stock
price"2.
