Monday, September 22, 2008

ASX Bans Shorts

Australia Bans Short Selling

The Australian Securities and Investments Commission Sunday banned covered short selling of all listed shares following moves by other countries to ban short selling of financial stocks.

In a rapid escalation of the clampdown on short selling, ASIC said in a statement that it had decided to ban covered short selling from the start of trading Monday because a number of countries had banned covered short selling of financial stocks and there was a risk that if Australia didn’t follow with its own ban that there would be a risk of “unwarranted activity” in the Australian market.

“These measures are necessary to maintain fair and orderly markets (ed: yeah right!) in these exceptional times of global crises of confidence in financial markets,” ASIC Chairman Tony D’Aloisio said in a statement.

“Because of the relatively small size and the structure of the Australian market, it is necessary to extend the prohibition to all stocks,” he said. “To limit the prohibition to financial stocks, as has been done in the U.K., could subject our other stocks to unwarranted attack given the unknown amount of global money that may be looking for short-sell plays.”

Things will get worse. Without bids from short covering traders, when selling pressure commences, the market will drop like a hot knife through butter. This is therefore caused by either utter incompetence, or intentional destruction. The latter is more likely.

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