Australia??s securities regulator lifted its eight-month ban on covered short selling of financial stocks on Monday bringing the country into line with all major developed markets that had already lifted their temporary bans.However, the Australian Securities & Investments Commission, which lifted the ban citing a stabilisation of market conditions, warned it would ??immediately? reimpose the ban if it believed that market conditions warranted such a move.
Although the effectiveness of the short selling ban had been questioned with critics arguing it hit trading volumes but did not necessarily reduce market volatility, analysts said ASIC??s warning would likely deter future short selling activity in Australia.
Regulators around the world temporarily banned short selling last year during the height of the global financial crisis after markets panicked in the aftermath of the collapse of Lehman Brothers.
ASIC noted that it would monitor the market with particular attention to short selling activity by hedge funds and similar institutions that could potentially ??harm Australia??s financial system?.
