Australian Securities Exchange - Short Selling

Short Selling

Short selling of shares is permitted on the ASX, but only among designated stocks and with certain conditions:

  • ASX Trading Participants (brokers) must report all daily gross short sales to ASX. The report will aggregate the gross short sales as reported by each Trading participant at an individual stock level.
  • ASX publishes aggregate gross short sales to ASX participants and the general public.

Many brokers do not offer short selling to small private investors. LEPOs (below) can serve as an equivalent, while contracts for difference (CFDs) offered by third-party providers are another alternative.

In September 2008, ASIC suspended nearly all forms of short selling due to concerns about market stability in the ongoing global financial crisis. The ban on covered short selling was lifted in May 2009.

Further to this - the biggest change in this space for ASX in the last 15 years was the introduction of Settlement Rule 10.11.12. If you cannot provide stocks when settlement is due, ASX forces your clearer to go into the market and cover themselves.

ASTC Settlement Rule 10.11.12 requires that if a Failed Settlement Shortfall exists on the second Business Day after the day on which the Rescheduled Batch Instruction was originally scheduled for settlement (that is, generally on T+5), the delivering Settlement Participant must either:

  • close out the Failed Settlement Shortfall on the next Business Day by purchasing the number of Financial Products of the relevant class equal to the Failed Settlement Shortfall; or
  • acquire under a securities lending arrangement the number of Financial Products of the relevant class equal to the Failed Settlement Shortfall and deliver those Financial Products in Batch Settlement no more than two Business Days later.

Read more about this topic:  Australian Securities Exchange

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