What is the new policy?
On 21 September 2008 ASIC decided to prohibit the creating or increasing of naked or covered short positions in all ASX listed shares.
What is the difference between 'naked' and 'covered' short selling?
Naked short selling involves the sale of stock without a stock lending agreement in place. It is important to note that IG Markets only ever participates in covered short-selling to hedge our client’s positions. This means that where there is always a binding stock lending agreement in place with our hedging brokers.
How long will these restrictions last?
ASIC has extended the short selling ban on Australian shares until 18 November with the ban on short selling financials extended until 27 January 2009.
What if I already have an existing short position in an Australian stock?
You can keep your position open but you cannot increase your short position any further. Under certain circumstances when borrowing restrictions arise, as detailed in our Customer Agreement, this may not be the case and your position may have to close prematurely.
Could I mistakenly open a new short stock position?
We have adjusted our systems to impose restrictions on all Australian stocks.
Will I have any difficulties closing long positions in Australian stocks?
No, selling to close an open position is not short selling and is completely unaffected by these changes.
Are other markets outside of Australia going to be affected?
UK
The FSA has introduced new short selling provisions ("Short Selling (No 2) Instrument 2008") which prohibit the active creation or increase of net short positions in a number of publicly quoted financial companies. A list of affected stocks can be found here. A link to an FAQ issued by FSA can be found here.
US
Short selling is prohibited on publicly quoted financial companies. More information and a list of affected stocks can be found here.
Other countries which have adopted similar positions are France, Germany, Spain, Netherlands, Switzerland, Ireland and Canada (Ontario).