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The Australian stock exchange opens today with a total ban on short selling.
The surprise move was announced last night, after a less restrictive ban on “naked” short selling – shorting without actually owning the shares – was revealed on Friday.
Now, “covered” short selling – in which traders borrow shares to short – is included too.
ASIC has followed in the footsteps of regulators in the US and the UK, which moved late last week to ban short sales in financial stocks.
Other countries to follow suit include France, Germany, Switzerland, Ireland and Canada (Ontario).
But the Australian ban covers all 2600-odd stocks on the ASX bourse.
The decision not to limit the ban to financial stocks, was taken out of concern that if short sellers could not access those stocks, they would target other sectors.
“To limit the prohibition to financial stocks, as has been done in the UK, could subject our other stocks to unwarranted attack given the unknown amount of global money which may be looking for short sell plays,” ASIC chairman Tony D’Aloisio said.
The list of Australian listed companies to have their share price ravaged by short selling this year includes Macquarie Bank, ABC Learning Centres and Babcock & Brown.
Mr D’Alosio said that in light of the action taken by other regulators, the ASX needed a “circuit-breaker to assist in maintaining and restoring confidence".
The ban lasts for the next 30 days.