For the uninitiated, short-selling is where your broker borrows shares from an institution and gives them to you so that you can sell them on the stock market. The intention being that you believe the share price is going to fall. Once it has fallen, you buy the shares on the market and give them back to your broker who in turn gives them back to the institution.
It's a fairly simple concept, but it is largely the domain of institutional investors rather than private investors. There are many people in the investing community who see short-selling as heresy or immoral, others argue that it all helps to improve price discovery in the market and reduce volatility.
Personally we don't really care either way. However, there are a couple of issues that should be considered. First is the issue of transparency. The Australian Securities Exchange is forever trumpeting on about how wonderful it is and how transparent all dealings with the ASX are, yet despite this, it is unable to provide any vaguely accurate statistics to investors about how much short-selling there is in particular shares.
The crazy thing is that it would not be that difficult for the ASX to do this. Quite simply all it would have to do is remove the process of stock lending from the broking firms and instead place that responsibility with the ASX. The broker would then simply place a "Short Sell" order in their system which is then highlighted as such by the ASX. Those institutions whose business it is to lend out stock (such as NAB and ANZ) would still have a role to play, only they would be lending stock to the ASX rather than individual brokers.
It isn't hard; it's just whether there is the will.
MMX Price at posting:
$2.02 Sentiment: Buy Disclosure: Held
