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ASIC eases shorting ban for dual-listed stocks

September 23, 2008 - 10:27AM

In another display of the confusion wracking the local share market, the corporate regulator has announced it will allow investors trading the difference between share prices on dual-listed stocks to make covered short sales.

The move by the Australian Securities and Investments Commission largely affects funds trading in the dual-listed shares of top miners BHP Billiton and Rio Tinto.

The clarification issued by the Australian Securities Exchange, at the request of ASIC, will permit traders to conduct buy and sell transactions on all exchange traded option put and call contracts.

ETOs derive their prices from other financial instruments, allowing investors to profit from the movements of an underlying security.

ASX made the announcement minutes before the second day of ASX trade in which short selling has been banned, following the lead of its regulatory peers in the US and UK.

Short selling is the selling of borrowed stocks, hoping to buy them back at a lower price.

ASIC's short-sale ban for at least one month sparked confusion on the local market, delaying the start of Monday's trade by one hour, with many in the trading industry saying that the regulator had gone too far.