ASIC standardises reporting of short positions

The Australian securities regulator on Wednesday issued a class order which aims to clarify and standardise reporting of short positions in the Australian securities market.

Since 1 June 2010, short-sellers have been required to report to the Australian Securities and Investments Commission (ASIC) their short position in a listed security or other listed product. ASIC aggregates this data and publishes to the market the total of the reported short positions in these products.

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Since the implementation of short position reporting in June 2010, ASIC has observed different industry practices for calculating and reporting short positions, particularly among fund managers and investment banks.

Following consultation with industry groups from August 2010, ASIC has clarified in class order CO 10/1037 that short-sellers will no longer be able to net-off long and short positions - where those positions are held in different capacities.

For example, a fund manager who has 4,000 XYZ Ltd shares in its capacity as trustee of fund A and is short 1,000 XYZ Ltd shares in its capacity as trustee of fund B must not net-off these positions held in different capacities and must report to ASIC a short position in XYZ Ltd of 1,000 shares.

ASIC's clarification of the short position reporting requirement will standardise reporting of short positions and ensure the markets have a more accurate representation of the overall short positions in section 1020B products.

The class order will commence on 17 January 2011. In setting this commencement date, ASIC considered submissions from industry groups about the time required to implement any necessary system changes.