House debates

Wednesday, 26 November 2008

Corporations Amendment (Short Selling) Bill 2008

Second Reading

12:00 pm

Photo of Chris PearceChris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Hansard source

and I am pleased to hear that the members opposite agree.

There is also the government’s exposure draft, which was released in September during the now forgotten consultation period. Key industry groups, including the Investment and Financial Services Association, the Australian Financial Markets Association and the Securities and Derivatives Industry Association, do not agree with the government’s preferred option 2 in the exposure draft. There is significant opposition to the disclosure of covered short sales to other brokers as proposed in option 2. Industry advocates that positions should be disclosed to the ASX, as market operator, and not to other brokers, so as to protect commercial advantages and prevent price distortion. Key industry participants support the implementation of a permanent disclosure regime where the market participants—investors and fund managers—report their short sale positions directly to the market operator, the ASX, on a company-by-company basis. The information would then be published by the ASX on that basis. Once again, this position is contrary to the government’s selected option 2 in the exposure draft.

Industry largely has a preference for disclosure of positions to occur one to two weeks after the short sale, not on the following day as proposed by the government’s favoured option 2 in the exposure draft. Industry concerns include the proliferation of ‘copy-cat’ style behaviour, where speculators would derive great benefit from the publication of daily short-selling data. In addition, a next-day disclosure regime may expose commercially sensitive and active investment research to other participants, which could further distort the market. It has also been strongly argued to us that an exemption threshold for small traders should exist within the legislation. This would reduce unnecessary costs for small market participants. I also note that there are no legislative provisions for stock lending, despite stock lending being heavily featured in the now forgotten exposure draft.

Not only does industry have issue with schedule 3 but Treasury officials stated during the Senate Standing Committee on Economics hearing the other day that it was not ideal that the particulars on how the disclosure regime would actually operate are not invested in the main legislation. The Australian Financial Markets Association were one of the few industry groups—indeed, one of only two—that were allowed, that were actually given permission, to present to the Senate Standing Committee on Economics. This is despite many requests to appear before the committee. AFMA strongly asserted that the type of information that would be required for disclosure should be in the legislation, not left to regulation.

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