The Investment and Financial Service Association (IFSA) has responded to the Government's draft legislation that requires the disclosure of covered sale transactions in Australian financial markets, but believes more work can be done in the interim.

"We are delighted with the minister coming out with the exposure draft bill as it puts more certainty on the table," IFSA deputy chief executive John O'Shaughnessy said.

"But for the intervening period... Australia needs to keep an eye on what is happening in other domains and we would like to go back to the Friday position, particularly if there is a move in the US on the 2nd October, which is their review date."

According to O'Shaughnessy, the Friday position - where naked short selling is banned - but covered short selling is acceptable with appropriate market disclosure, would "put more liquidity and a more even market position in place in the intervening time before the legislation goes through."

These comments come on the back of the release of The Corporations Amendment (Short Selling) Bill, in preparation for the removal of the current ASIC halt on most types of covered short-selling.

The draft legislation, released yesterday, would require the disclosure of transactions, where a seller has entered into a securities lending arrangement to cover a sale.

"At such a time that ASIC re-allows limited covered short-selling, clarity around covered sale transactions will increase market transparency, precent market manipulation, assist regulator surveillance and enable compliance with continuous disclosure obligations," the Minister for Superannuation and Corporate Law Nick Sherry said.

ASIC has temporarily banned naked and covered short-selling of all securities, managed investment products and stapled securities on licensed markets in Australia.