# How will ASX ban on short selling affect trading?



## cordelia (21 September 2008)

Whilst I understand the process of short selling....both naked and covered....I would like to know how this will effect the ordinary trader who takes or currently holds short positions through brokers such as Comsec, Westpac or IB...

This may seem like a silly question but when you go through a broker how do you know if your short is a covered or naked one? because you are not the one who arranges the "borrow"?

I don't sell short because I don't have a feel for it....so I don't know what is involved?

Will this mean that all short trades will be stopped.....what will be the repercussions for those with open positions? Will they have to close out their positions within a certain timeframe...

If someone can explain this it would be very helpful..

I know that short selling is a highly contentious issue right now but I am not seeking an opinion on the right or wrong of shorting just info on the above...


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## agro (21 September 2008)

*Re: How will ASX ban on S Selling effect trading*

don't know but wish they did it before i had sold my shares in fortescue


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## It's Snake Pliskin (21 September 2008)

*Re: How will ASX ban on S Selling affect trading*

Cordelia,

They are banning covered shorts too. Retails shorters are no threat.  

I'll probably close my shorting account and shift dollars elsewhere as the liquidity is going to dry up. Lucky I have no shorts on at the moment. 

I am interested what will happen to the market too. You beat me to posting this thread.


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## cordelia (21 September 2008)

*Re: How will ASX ban on S Selling affect trading*



It's Snake Pliskin said:


> Cordelia,
> 
> They are banning covered shorts too. Retails shorters are no threat.
> 
> ...




By retail shorters I gather you mean accounts that you trade though Comsec for example....but where will Comsec borrow the stock from to supply its customers...Sorry if my sentence sounds wrong but I am confused...

So who is banned from short selling...I know it now includes covered as well as naked.....


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## It's Snake Pliskin (21 September 2008)

*Re: How will ASX ban on S Selling affect trading*



cordelia said:


> By retail shorters I gather you mean accounts that you trade though Comsec for example....but where will Comsec borrow the stock from to supply its customers...Sorry if my sentence sounds wrong but I am confused...
> 
> So who is banned from short selling...I know it now includes covered as well as naked.....




Yes by retail I mean the average person's account with Comsec and Mac etc.
I don't know where they get the stock from. That is something I have trusted the system with - Re: covered shorts.

Ok so I  have re-read the announcement and it states this:


> covered short selling banned (subject to limited authorised market-maker exemption)



http://www.asic.gov.au/ASIC/asic.ns...ered short selling not permitted?opendocument

Does this affect Direct Market access providers such as E-trade and Macquarie?


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## Julia (21 September 2008)

*Re: How will ASX ban on S Selling affect trading*



It's Snake Pliskin said:


> Y
> I don't know where they get the stock from. That is something I have trusted the system with - Re: covered shorts.



I haven't followed all this in detail but one of the objections to short selling in general has come from representatives of the Super Funds whose retirement funds are being used for lending to short sellers.
I doubt that too many ordinary superfund investors have been asked if they are happy for their stocks to be used in this way.


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## njc.corp (22 September 2008)

my view is pretty basic-

they are going to stop people making money-

the word and correct me if i am wrong-

this banning is do what-stop prices going down?

is it-?

so does that mean prices will go up

typical country-lets do what the yanks are doing

to many changes in my eyes means to many rules and with too many rules means their;s more damaged to come

the damage as to come in order to start a trend cycle-

i dont have any shorts but their needs to be a different side-not just up-

Thanks

Nick--


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## Calliope (22 September 2008)

njc.corp said:


> my view is pretty basic




*basic* After reading your post I have absolutely no idea what your view is.


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## mayk (22 September 2008)

Well the gap is massive, BHP up 12%. It is scary and possibly unsustainable. There is no downward pressure, only upward, which might creat the Mother of all bubbles.


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## nomore4s (22 September 2008)

lol, the only short I still have open is WOW, and I thought I'd get stopped out today but it's down about 4%


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## Aussiest (22 September 2008)

mayk said:


> There is no downward pressure, only upward, which might creat the Mother of all bubbles.




Well, wouldn't you wait till the bubble burst, buy in and then sell during next rally? That's if it's within the 30 days. Who knows what will happen with the 30 days is up ???


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## jersey10 (22 September 2008)

Aussiest said:


> Well, wouldn't you wait till the bubble burst, buy in and then sell during next rally? That's if it's within the 30 days. Who knows what will happen with the 30 days is up ???




4200 is what will happen


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## prawn_86 (22 September 2008)

We no longer have the same market conditions as what existed 1 week, year, decade ago.

How are people suppoesed to INVEST with things like this changing the market dynamic completely and other issues like the 30 day renewal hanging over the market.

Any investment made this month is a pure gamble IMO, as whats to say the goal posts wont be moved once again.

Efficient market my ass....


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## jersey10 (22 September 2008)

prawn_86 said:


> We no longer have the same market conditions as what existed 1 week, year, decade ago.
> 
> How are people suppoesed to INVEST with things like this changing the market dynamic completely and other issues like the 30 day renewal hanging over the market.
> 
> ...




I totally agree. It's like the ref in the middle of a football game saying you can't pass backwards for the next 30 minutes.  After that 30 minutes is up i'll reassess how i think the game is flowing and then make a new rule.


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## white_goodman (22 September 2008)

whats the odds the markets driven up the few days before the 30 day ban is up and we plunge the day its back into effect


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## njc.corp (22 September 2008)

Calliope said:


> *basic* After reading your post I have absolutely no idea what your view is.






my view is this short selling rule is only making the problem worst in the long run-

i am glad i am not trading as others will see this is a new twist in the works-

maybe when things hits the fan u will understand my view-

as far i am concern we should see rallys all week?

because theirs been a lot of talk that shorters are causing this problem

so lets see how this plan's out-

i will be watching from the sidelines like a whimp with cash in hand-

for my sake its a bad time to trade-

Thanks

Nick--


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## njc.corp (22 September 2008)

prawn_86 said:


> We no longer have the same market conditions as what existed 1 week, year, decade ago.
> 
> How are people suppoesed to INVEST with things like this changing the market dynamic completely and other issues like the 30 day renewal hanging over the market.
> 
> ...




prawn u might have it wrong because the media and gov reckon by injecting so much money in the market that consumer confidence will come back-

my question is how u suppose to restore confidence if a lot have lost a lot of money lately?

blame the shorters it's their fault-

Thanks

Nick--


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## nunthewiser (22 September 2008)

white_goodman said:


> whats the odds the markets driven up the few days before the 30 day ban is up and we plunge the day its back into effect




personally think we due a plunge a bit sooner than that


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## nunthewiser (22 September 2008)

njc.corp said:


> prawn u might have it wrong because the media and gov reckon by injecting so much money in the market that consumer confidence will come back-
> 
> my question is how u suppose to restore confidence if a lot have lost a lot of money lately?
> 
> ...




LOL u sounding like twiggy !!! how is it the shorters fault ? did they create the market downturn or merely profit from it ? blame the shorters for the credit bubble too ? how about realestate bubble ?? oh hang on i just burnt my egggs , bleedin shorters suck dont they


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## Greg71 (22 September 2008)

Blame it on the rain.


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## fordxbt (22 September 2008)

jersey10 said:


> I totally agree. It's like the ref in the middle of a football game saying you can't pass backwards for the next 30 minutes.  After that 30 minutes is up i'll reassess how i think the game is flowing and then make a new rule.




exactly. if it swings bullish for a month ill pull the plug on the few long trades that were hit hardest and keep the performers
something i probably should of done a long time ago when the green prospectives became red-lined losses..the short term holds that become long-term backbenchers.
if this is the 2nd chance window im taking it


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## njc.corp (22 September 2008)

nunthewiser said:


> LOL u sounding like twiggy !!! how is it the shorters fault ? did they create the market downturn or merely profit from it ? blame the shorters for the credit bubble too ? how about realestate bubble ?? oh hang on i just burnt my egggs , bleedin shorters suck dont they




where did u see me say it was the short sellers fault?

i was just stating if u cant work it out-that u might as well blame shorter sellers as its their fault stock goes down-

is that not what twiggy said or what the media is dishing out?

i know i aint paying attention to rubbish stories-are u?

u been to opsm-if not make your way down their so u can see a bit better-

Thanks

Nick--


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## cuttlefish (23 September 2008)

Wasn't much activity in bank ETO's today - not sure if its because of the volatility or because the MM's can't hedge their positions so weren't offering spreads.


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## nunthewiser (23 September 2008)

njc.corp said:


> prawn u might have it wrong because the media and gov reckon by injecting so much money in the market that consumer confidence will come back-
> 
> my question is how u suppose to restore confidence if a lot have lost a lot of money lately?
> 
> ...




"blame the shorters it's their fault-"



Right there Bucko !!! now what was you dribbling about in regards to glasses champ?


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## 1mann (23 September 2008)

*Short selling ban, why?*

Hi traders, I am the only one who thinks that the total ban on selling stocks short is proof the ASIC have lost the plot,I never heard the company CEOs or the investment bankers complaining when the share prices were going through the roof,Mr Forrest please take note,and the banks have taken offence at people selling of their shares just because they have mislaid a few bucks ,give or take a couple of hundred billion, stocks can't keep going up all the time and it is wrong to change the rules overnight, what do they think will happen on the day that they lift the short selling ban ? it's not rocket science. Investors have a simple choice if they think a stock will rise they buy it,and if they think that the share will fall they sell it, ASICs will not stop investors selling stocks that they already own. I agree that hedge funds and the like can manipulate the market ,but they are allowed to manipulate it on the long side and i don't hear people screaming for a ban when the share price is going up like a rocket.All ASIC has done with this ban is to allow the big boys to sell their shares at a better price for a few weeks, because they have stopped likeminded traders ,like myself from profiting from the stupidity that ,these so called professionals, have created for themselves,ASIC have now manipulated the market as a panic measure,and it wont work,they have added to the problem, and they will not be held responsible for thier actions.


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## njc.corp (23 September 2008)

nunthewiser said:


> "blame the shorters it's their fault-"
> 
> 
> 
> Right there Bucko !!! now what was you dribbling about in regards to glasses champ?




i don't need glasses-maybe u dont either

but u need to understand the difference between a joke-

i will say it again-if u cant find a reason why the market is down-blame short sellers like everyone else-

even andrew forrest did-he was not joking but i was-

joke-

just step away from the screen and have a breath-

If u dont understand that i will just give in and i say i need glasses-


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## nunthewiser (23 September 2008)

LOL no worries .. thats the problem with text compared to conversation , the giggle in the speech is mislaid , no worries , wires crossed have a great evening


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## skc (21 October 2008)

*Short selling ban extended*

I was just wondering what was happening to the initial 30-day ban and here's the answer.

ASIC today said it would extend the ban on covered short selling for non-financial securities for a further 28 days until 18 November 2008, when it expected the ban would be lifted.

In its announcement of 21 September ASIC said that the ban on covered short selling for non-financial stocks would be reviewed in 30 days. In the case of financial stocks, ASIC said that its review would be in line with time limits imposed by other international regulators.

Following the 30 day review, ASIC has decided to maintain the ban on covered short sales for non-financial stocks until 18 November 2008. ASIC expects to lift the ban from opening of trading the next day. 

http://www.asic.gov.au/ASIC/asic.ns...nds ban on covered short selling?opendocument


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## nick2fish (21 October 2008)

I am an investor who only trades on occasion to recover losses from forced sales. 

Extended ban I say YEAH!!!!!! 
Short sellers you are welcome back when the playing field will become even again. 

Oh and the more you moan in this time the more ridiculous you look IMO


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## cutz (21 October 2008)

nick2fish said:


> I am an investor who only trades on occasion to recover losses from forced sales




G’Day,

Just out of curiosity how is a sale forced and how do you recover losses; please don’t misinterpret me as being smart, I am just always interested in learning new things.

Cutz


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## nick2fish (21 October 2008)

cutz said:


> G’Day,
> 
> Just out of curiosity how is a sale forced and how do you recover losses; please don’t misinterpret me as being smart, I am just always interested in learning new things.
> 
> Cutz




Hi 
I'm afraid you won't learn anything new from me unfortunately but in answer to your question as investor I am usually forced to sell when one of my holdings may be tanking down in a rapid manner. 

I usually ignore day or week to week fluctuations in owned stocks but if I have been unlucky enough to buy a stock whose fundamental appeal has changed for the worst I have to exit.

An example of one such stock is BNB.

I will incur a loss so then I will trade stocks to regain some or hopefully all of my capital loss.
Regarding short selling I don't have a problem with it except in these extreme times of global financial uncertainty. Once blind fear and panic is replaced by caution and prudence bring it on and by whats happening now it won't be long


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## aramz (24 February 2010)

*Total ban on short selling*

Heard word of it today and found this:

http://www.smh.com.au/business/asic-in-total-ban-on-short-selling-20080921-4l0r.html

Any opinions or general thoughts regarding this matter?

How would full time traders who extensively use shorts cope with this in a bear market?


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## aramz (24 February 2010)

*Re: Total ban on short selling*

Wow the date actually says 08 but came up in a google search for 'short selling ban 2010'

This came up in the search subheading on google:

10:43AM Wednesday Feb 24, 2010; Today's Paper ... Australian and other European regulators had followed with their own ban on short ... ASIC said it would reassess the ban on short selling for non-financial stocks in 30 days. ...

I know there is current talk of this happening though


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## JonnoB (24 February 2010)

The SEC is due to meet on Wednesday regarding short sale ban. The current suggestion is for a circuit breaker measure. It would restrict short-selling in a company's stock if that stock fell by more than a certain percentage. This time they also want to restrict market makers.

Hope they remember the implications from last time.
U.S. securities regulator Christopher Cox said "While the actual effects of this temporary action will not be fully understood for many more months, if not years, knowing what we know now, I believe on balance the commission would not do it again" with regard to the short selling ban.


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## satanoperca (24 February 2010)

I have heard it all. 

Ban short selling, what a joke.

Markets go up, markets go down. Play the game feel the pain.

Regulation doesn't work, it just screws things up, just have a look at the FHBG and all those that the govnuts will have to bail out.

Get a grip people, we either live in a free market or go to a communist country.

Cheers


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## nulla nulla (24 February 2010)

Are we talking about the banning of naked short selling or the total banning of all forms of short selling? 
Personally I have always had an issue with people selling something they do not own and do not have clear title to.


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## gooner (24 February 2010)

nulla nulla said:


> Are we talking about the banning of naked short selling or the total banning of all forms of short selling?
> Personally I have always had an issue with people selling something they do not own and do not have clear title to.




In the long run it is all about the profits of the business. Short sellers really only make profits off of short term traders (or panicky longer term investors).

Personally I have no issue with short selling. Improves liquidity and increases price transparency


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## Trembling Hand (24 February 2010)

nulla nulla said:


> Are we talking about the banning of naked short selling or the total banning of all forms of short selling?
> Personally I have always had an issue with people selling something they do not own and do not have clear title to.




Like futures trading?


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## JonnoB (24 February 2010)

The Reuters article just mentioned short selling. The SEC rule is still in flux and could change before the Wednesday meeting.


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## JonnoB (24 February 2010)

The article only mentioned stocks. 
http://www.reuters.com/article/idUSN2315370420100224


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## Wysiwyg (24 February 2010)

gooner said:


> Personally I have no issue with short selling. Improves liquidity and increases price transparency



I'm only familiar with CFD short selling which is synthetic and derives price from an under-lying equity. Could you briefly explain how liquidity is improved with short selling and where the increased transparency comes from.

Note I have only ever used CFD to short sell.


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## Aussiejeff (25 February 2010)

Overnight the SEC brought in new rules "restricting" short selling of US stocks. http://www.thebull.com.au/articles_detail.php?id=9696

I would expect ASX to follow shortly.

_The only way is up...._


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## Trembling Hand (25 February 2010)

Aussiejeff said:


> Overnight the SEC brought in new rules "restricting" short selling of US stocks. http://www.thebull.com.au/articles_detail.php?id=9696
> 
> I would expect ASX to follow shortly.
> 
> _The only way is up...._



 It only reinstating the uptick rule. No big deal.



Wysiwyg said:


> I'm only familiar with CFD short selling which is synthetic and derives price from an under-lying equity. Could you briefly explain how liquidity is improved with short selling and where the increased transparency comes from.




The increase liquidity comes from the fact that you have to borrow the shares first. Where you borrow them from, or your broker borrows them, is from long term institutional holders  who buy the shares and aren't planing to offer them back to the market.

So you have the short seller selling them which is added liquidity at the top then you also have the short seller buying them back when he wants to close the trade. That's two trades that the market would never see. Importantly when the rest of the world is losing its head and dumping stock, such as March 08, you have short sellers placing buy orders. This is a very unrecognised benefit from shorting. When all the peanuts that buy at the top and then spew up their orders at the bottom creating cascading falls it's the shorts that slow the falls by placing buy orders.


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## Aussiejeff (25 February 2010)

Trembling Hand said:


> It only reinstating the uptick rule. No big deal.




Wouldn't it be fairer to introduce at the same time a counter rule to prevent "speculative buying", of shares that suddenly jump by +10%?

At least that way some "balance" is brought back to the trading equation?

Yeah, I know.

That just won't happen. 


Party on....


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## Trembling Hand (25 February 2010)

No Lindsay Tanner, Minister for Finance and More Regulation, told me yesterday when I was doing some insider trading for him that they are bringing in a FTPG.

*F*irst
*T*ime
*P*unters
*G*rant

They will give any punter that hasn't taken their first trade $9000 to take the first step. That should get another bubble on its way.


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## Aussiejeff (25 February 2010)

Trembling Hand said:


> No Lindsay Tanner, Minister for Finance and More Regulation, told me yesterday when I was doing some insider trading for him that they are bringing in a FTPG.
> 
> *F*irst
> *T*ime
> ...






Just a thought...

With the 'uptick' rule helping to reduce the risk of a sudden fall in share price by effectively "stopping out" all shorters of shares at the -10% per day drop level, might this then lead to a significant increase of speculation and "pumping" of "penny dreadful" stocks - much more so than for the big caps where % moves are generally much smaller, since a lot of the "dreadfuls" can move up AND down by much more than the 10% drop level just mandated by the SEC.

Now it seems in the US the risk of doing your dough by buying into a "penny dreadful" have been greatly reduced??

Interestink. Is that a good thing or setting the market up for trouble down the track?


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## satanoperca (25 February 2010)

Trembling Hand said:


> No Lindsay Tanner, Minister for Finance and More Regulation, told me yesterday when I was doing some insider trading for him that they are bringing in a FTPG.
> 
> *F*irst
> *T*ime
> ...




What a brilliant idea. 

Ever thought of getting into politics?

But would they be able to short the market or would they have to go long so that the old timers can get out before the market falls over?


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