The operator of the Australian Securities Exchange, ASX Ltd, has called for an indefinite ban on "naked" short selling, as part of a series of recommendations aimed at making the technique more transparent.
ASX says the current temporary ban on naked short selling - as part of overall short selling restrictions imposed by the Australian Securities and Investments Commission - should be continued indefinitely.
In a formal response to draft federal legislation on short selling, ASX said a ban on naked short selling - when shares are sold that the vendor does not own or hold - was "consistent with feedback received from a number of stakeholders as part of ASX's earlier consultation process".
This consultation process had "indicated the provisions allowing naked short selling could be removed without adversely affecting the operation of the market," ASX said in its submission on the legislation.
ASX said it supported the federal bill, recommending that it should include real-time "tagging" of covered short sales, and the reporting of net end-of-day short positions per stock.
The owner and operator of the Australian Securities Exchange and Sydney Futures Exchange said the Corporations Amendment (Short Selling) Bill 2008 also should reveal custodian and other participant settlement instructions for loaned and borrowed stock.
Details would be collated by the ASX at market close each day, and published pre-market for the ensuing day's trading.
ASX said, however, that "adequate time needs to be allowed for financial intermediaries to implement the systems and process changes, which are pre-conditions to the successful introduction of these recommendations".
