The Investment and Financial Services Association (IFSA) has come out in support of ASIC's "long overdue" decision yesterday to lift the ban on covered short selling of financial stocks.
"We welcome ASIC's decision to lift the ban. 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," IFSA chief executive Richard Gilbert said.
Covered short selling of securities was temporarily banned on 21 September 2008 due to extreme market volatility.
ASIC lifted the ban on covered short selling of non-financial shares on 19 November and told the market on 5 March that the ban on short selling of financial securities would continue until 31 May.
ASIC said this position would be kept under review and it may reinstate the ban without industry consultation should it feel market conditions warrant such action.
"ASIC has to have the power to intervene in the market provided it uses the appropriate discretion," Gilbert said.
However, any reimposition will simply fuel ongoing market uncertainty for investors in the Australian market, according to the Australian Securities Lending Association (ASLA).
"Better liquidity is essential for market makers and participants to facilitate various transactions. This liquidity is vital for market makers to fulfil their role," ASLA co-chair Peter Martin said.
It was a huge mistake by ASIC to put in place the short-selling ban without industry consultation, Alternative Investment Management Association (AIMA) chief executive Kim Ivey said.
"Since the ban was put in place we have had good consultation from ASIC. It will be very disappointing if ASIC puts back in place the draconian measures without industry consultation."
