ASIC placed a temporary ban on covered short selling of securities on 21 September last year, citing extreme market volatility.
The regulator lifted the ban on covered short selling of non-financial shares a month later and then told the market on 5 March that the ban on short selling of financial securities would continue until 31 May.
Less than a week out from the official deadline, the corporate regulator flexed its muscles and removed the ban.
The ban removal has been supported by the industry, with the Investment and Financial Services Association (IFSA) coming out in support of ASIC’s move, despite calling it a “long overdue” decision.
Commenting on the decision, IFSA chief Richard Gilbert said: “We believe it is long overdue. We support the move as we believe we have to keep in step with the rest of the world if we are to continue to operate as a market of distinction.”
In a statement from the regulator, the decision to remove the ban stems from more favourable markets, though it was quick to note its position on the matter would be kept under review.
“ASIC has reviewed market conditions and considers that the balance between market efficiency and potential systemic concern has now moved in favour of the ban being lifted,” it said.
While the removal of the ban may inspire a spending spree on cheaper shares, it may be a case of the regulator giving and then taking away.
For ASIC to remove the ban ahead of time may not be as stellar an idea as the regulator may have first thought.
Yes, the ban has been removed, yet the fact no industry consultation was undertaken to begin with, and ASIC now stating it may change its mind again in the future on its own devices, does little to instil the right level of confidence in the market.
Australia’s financial market is not a petulant child that needs to be punished for wrongdoing.
A greater level of understanding needs to be had on the regulator’s behalf over the competency of the industry.
Lumping everything (stocks, funds, firms) in the same category or bag will do no good. Industry consultation needs to occur.
Yes, it may be a time consuming task, yet if consultation was taken over this banning, perhaps industry would not have had to wait six months for the outcome.
