Friday November 14, 2008
Australia bans naked short-selling
CANBERRA: Australia moved to slap a permanent ban on the most controversial form of short-selling yesterday amid an historic fall in share prices, part of a crackdown that is also targeting hedge funds and credit rating agencies.
The move is in line with similar bans in several European states, and tighter disclosure rules and a ban on short selling of shares in more than 950 companies in the United States, as policymakers try to limit the fallout from the global financial crisis.
Corporate Law Minister Nick Sherry, in unveiling proposed changes to financial regulation, also announced tighter regulation and supervision of credit ratings agencies which have been accused of failing investors in the global credit crisis.
“Australia will be banning ‘naked’ short selling,” Sherry told reporters in a briefing, referring to a practice whereby investors such as hedge funds sell shares they neither own nor have borrowed in the hope of quickly buying them back at a lower price.
Naked short selling is considered murkier and more risky than traditional short selling, where investors borrow the shares they plan to sell. Traditional short selling is currently subject to a temporary ban, but is due to be lifted in coming weeks. — Reuters
Australian regulators banned covered and naked short selling in September in an immediate response to a global market meltdown, but they left the government to make the long-term decisions on these practices. — Reuters