ASIC has received a mixed reception from the investment community, on its covered and naked short-selling freeze.
“We have identified a range of issues pertaining to market liquidity, potential mandate breaches, efficient price discovery and prudent disclosure,” Investment and Financial Services Association deputy chief executive John O’Shaughnessy said in a statement.
“We will be liaising with the regulators and the Australian Securities Exchange on the interim measures, as we seek clarification and further guidance to issues as they arise.”
WealthStream Financial Solutions principal Keith Gateley welcomed the ban, and said any move to instil confidence in the stock market was a good thing.
ASIC’s weekend changes would impact superannuation fund investments, as some mandates incorporated covered short-selling, Australian Council of Super Investors chief executive Ann Byrne said in a statement.
An AMP Capital Investors spokesperson said: “AMP understands ASIC’s rationale for banning short-selling, given the current environment, and that it is appropriate for ASIC to review the situation again in 30 days.”
Hedge funds, which rely on short-selling for gains, would find it very difficult to operate in the short-term, hedge fund operator Fortitude Capital chief executive Tim McGowen said.
Research house Standard and Poor’s said in a statement it put 57 funds from 25 managers which use short-selling as a part of their investment strategy on hold.
The impact of ASIC’s new rules was unclear on their performances and the funds would be reviewed individually, according to the statement.
ASIC will review the restrictions in 30 days, but the ban will be in line with the time limits imposed by UK and US regulators, ASIC chairman Tony D’Aloisio said in a statement.
The ban applies to retail, sophisticated and institutional investors.
Contracts for difference provider IG Markets confirmed short-selling will be halted within its platform, according to a statement on the provider’s website.
