ASIC has issued a new legislative instrument that continues the effect of other ASIC instruments that were due to expire.
Under the Legislation Act 2003, all ASIC instruments are repealed automatically after a period of time unless action is taken to preserve them.
Many of the short selling instruments were passed around 2008 and after a public consultation ASIC has developed the new ASIC Corporations (short Selling) Instrument 2018/745 that will replace the expiring instruments.
The new instrument offers legislative relief for ETF market makers, deferred settlement trading, IPO sell downs and options for global firms to calculate short positions as at a global end calendar time.
The short selling instrument provides legislative relief to allow ETF market makers to make naked short sales in ETFs and managed funds during making a market in units in those funds.
This legislative relief facilitates market making which provides benefits of liquidity to the market but to rely on the relief ETF market makers will need to meet additional conditions.
Deferred settlement arrangements are an established market practice, but with the new instrument ASIC is granting legislative relief in the circumstance of a sale of unissued products during these periods.
ASIC is also granting relief in the instrument for conditional and deferred settlement trading that follows an IPO.
Naked short selling in the context of an IPO sell down will also be permitted where a special purpose company or saleco offers shares to IPO investors before it has an unconditional right to those shares.
Finally, the new instrument will now provide an option for firms to nominate to calculate their short positions as at the global end calendar time.
The global end calendar time is the end of the trading day in the location which the relevant transaction is booked as opposed to the current 7pm Sydney time.
