MARK COLVIN:
The financial regulator ASIC has responded to the sell down; the events of the last few days, with a move against what's called short selling in the market.
Nick Sherry is the Minister for Superannuation and Corporate Law, he joins me now.
Senator Sherry what exactly is being done?
NICK SHERRY:
Well two actions, firstly the ASX itself has introduced an interim ban on what is known as naked short selling and the regulator ASIC…..
MARK COLVIN:
Sounds rather exotic.
NICK SHERRY:
Unfortunately the action of naked short selling is not exotic. It's being used to manipulate the market and take advantage of the current situation, so the outcomes are not good.
MARK COLVIN:
What is it exactly?
NICK SHERRY:
Well it involves selling of stock you don't own. It's naked.
MARK COLVIN:
But even short selling involves selling stocks that you don't necessarily owned you may have just borrowed.
NICK SHERRY:
Well what ASIC has done has ensured that we will also see the disclosure of what is known as covered short selling. Both covered short selling and naked short selling practices in the current market environment, have been used to manipulate the market or take advantage of the consequences we've seen in global financial markets flowing on from US sub-prime…
MARK COLVIN:
There have been allegations about it in global financial markets. What have you actually seen here? Who's been doing what?
NICK SHERRY:
Well we believe that it has contributed to market volatility. It's inappropriate in the current markets for this sort of behaviour to occur so we welcome the action by ASX and ASIC as announced this afternoon.
I've had meetings, discussions (and the Treasurer has been included) with ASIC in discussions about these practices. We've decided, and we've supported these changes. They're interim actions until we see the passage through parliament of covered short selling legislation.
MARK COLVIN:
Isn't there a bit of inconsistency here? I mean it's gambling on prices - on stocks going down; you haven't banned people from gambling on stocks going up?
NICK SHERRY:
Well short selling is, if it's conducted properly - with the exception of naked short selling and the non-reporting of covered short selling - short selling is permissible and will continue. But as far as naked short selling and non-reporting of covered short selling, these two practices that have been acted on today, are inappropriate and are used to manipulate the markets, particularly in the current period of volatility, uncertainty and concern in the markets. And the action is being taken because of the current market circumstances.
It's an interim ban until such time as the covered short selling legislation passes the parliament.
MARK COLVIN:
All right thank you very much Senator Nick Sherry.
NICK SHERRY:
Thank you.
MARK COLVIN:
He's the Minister for Superannuation and Corporate Law.