ASIC (Australian Securities and Investments Commission) has extended its ban on the short selling of financial stocks yet again, until May 31, despite advice from international regulators that it should only be used as a temporary measure, and may imbalance markets and reduce liquidity.
While the ban has been in place, financial stocks have suffered just as badly as other companies. ASIC first introduced the ban in the third week of September 2008 amid the storm in equity and credit markets following the failure of Lehman Brothers. ASIC said the decision to extend the ban for a third time was based on ongoing market volatility.
On Wednesday the Australian stock market S&P/ASX200 index hit a low of 3143 points, a level not seen since August 12 2003. The trading of some financial sector stocks, such as investment bank Macquarie Group Ltd, has been especially volatile, over the perception the companies are in funding distress. Shares in Macquarie Group have fallen dramatically in spite of the ban.
The Australian Bankers Association welcomed the retention of the ban.
Update note: Ban was lifted on 31 May 2009.