SDIA has made representations to ASIC on issues of no-action relief and carve outs from the scope of the ban.  This has included relief in respect of short selling in connection with client facilitation, dual listed stock arbitrage and executive share option schemes.

On 7 October, 2008 SDIA held a meeting of members to obtain feedback on the Draft Short Selling Bill and Commentary issued for comment by Treasury. The meeting was facilitated by Blake Dawson.  Building on the excellent feedback from that meeting, SDIA consulted widely amongst its membership in the course of preparing a Submission on the Draft Bill. 

The SDIA Submission was sent to Treasury on 21 October 2008, and a copy can be viewed on the SDIA website. The key points in the submission are:

• SDIA’s preferred option is Option 4 involving utilizing the CHESS system to report the daily outstanding stock loan position for each security as the best available proxy for the overall short position in the security. CHESS has the functionality with moderate system development to deliver this.

• Treasury’s preferred Option 2, based on daily broker reporting of short sale data to the market,  has significant flaws.  Client failure to disclose short sales and/or to advise when the short position has been closed make broker reports highly unreliable.

• If broker reporting is to be required, then the short positions reported should not be cumulative, but should instead reset to zero each day,

• If naked short selling is to be permanently banned, there needs to be express carve out for appropriate cases such as client facilitation/market making, error trades, etc.

• There should not be a positive obligation on brokers to make inquiry of clients whether the sale is short every time an order is taken