On 27 July 2014, the Australian Securities and Investments Commission (ASIC) repealed the short sale tagging obligation.
Short selling is the sale of financial products that the seller does not own at the time of the sale. Short sale tagging refers to an obligation for market participants to specify the quantity of a sell order that is short at the time the sale order is placed or at the time the trade is reported. This is also known as real-time tagging, as opposed to reporting with a lag, such as end of day reporting.
The obligation was introduced in July 2012 (see the original RIS) and was due to commence in July 2014. The original motivation for introducing short sale tagging was to improve data available to the market and to regulators about short selling.
The current regulatory regime relies on a largely manual reporting process (known as end of day reporting). However, it was considered that the effectiveness of this regime was limited because approximately 60 per cent of market participants utilise algorithms when trading (rather than the traditional manual method of a broker entering an order into the market) and so therefore could not practically comply with the end of day reporting obligations.
Consultation since July 2012 has revealed significant implementation issues with tagging. Many stakeholders submitted that it was difficult for them to know if, at a given point in time, they were short or long on a particular asset given they could have multiple trading desks taking either position. It was also noted that there have been regulatory and market developments since 2012 that improved the effectiveness of the original (end of day) reporting regime.
In response to stakeholder feedback it was decided to not proceed with short sale tagging.
Removing this obligation was estimated to reduce industry compliance costs by approximately $13 million per year. These savings are mostly the result of avoided implementation costs, such as in relation to IT systems.
The proposal has been assessed as likely to have a measurable but limited impact on the economy.
A Regulation Impact Statement was prepared and certified by ASIC, and has beenassessed as compliant and consistent with best practice by the Office of Best Practice Regulation.
- RIS – Removal of the short sale tagging obligation [ 140KB]
- RIS – Removal of the short sale tagging obligation [ 226KB]