Shorted
Intermediate
14 min read

ASIC Short Selling Regulations & Reporting Requirements

Comprehensive guide to Australian short selling regulations including the Corporations Act 2001, ASIC Regulatory Guide 196, reporting thresholds, and the ASX short sales report. Covers covered vs naked short selling rules, net short position reporting, and daily publication of short selling data.

ASIC RegulationsCorporations Act 2001Regulatory Guide 196Short Selling Compliance

Overview of Australian Short Selling Regulation

Short selling in Australia is governed by a comprehensive regulatory framework designed to maintain market integrity while allowing legitimate short selling activity. The key pillars are the Corporations Act 2001, which provides the legislative foundation, and ASIC Regulatory Guide 196 (RG 196), which provides detailed guidance on compliance and disclosure obligations.

Corporations Act 2001 — Key Sections

Section 1020B — Naked Short Selling Prohibition

Section 1020B of the Corporations Act 2001 is the primary provision prohibiting naked short selling in Australia. It makes it an offence to sell financial products ("section 1020B products") that the seller does not own or does not have a presently exercisable and unconditional right to vest the products in the buyer.

In practice, this means that before executing a short sale, the seller must have a securities lending arrangement or other binding agreement in place that gives them the right to deliver the securities at settlement. This is known as covered short selling, as opposed to naked short selling where no such arrangement exists.

The prohibition applies to all "section 1020B products", which includes shares, debentures, and other financial products traded on licensed markets like the ASX. Violations can attract both civil and criminal penalties.

Section 1020AB — Short Sale Transaction Reporting

Section 1020AB of the Corporations Act 2001 requires market participants to report individual short sale transactions to the market operator (ASX). When a sell order is a short sale, it must be flagged as such at the time of execution. This real-time transaction-level reporting helps market operators monitor short selling activity as it occurs.

Section 1020AC — Short Position Reporting

Section 1020AC establishes the obligation for holders of short positions to report their positions to ASIC. This is distinct from transaction reporting — it captures the overall net short position held by each reporting entity at the end of each trading day. ASIC then aggregates these individual reports and publishes the total short positions for each security.

ASIC Regulatory Guide 196 (RG 196)

ASIC Regulatory Guide 196 is the primary guidance document for short selling disclosure and reporting in Australia. Published by the Australian Securities and Investments Commission, RG 196 provides detailed practical guidance on how market participants should comply with the short selling provisions of the Corporations Act 2001.

Key Requirements Under RG 196

  • Reporting threshold: Net short positions must be reported when they reach 0.01% of a company's total issued capital or $100,000, whichever is less. This low threshold ensures comprehensive coverage of short selling activity.
  • Daily reporting: Positions must be reported by 9:00 AM on the next trading day after the position is established or changed.
  • Publication with T+4 delay: ASIC publishes aggregated short position data 4 trading days after the reporting date, balancing transparency with protection of reporters' strategies.
  • Net vs gross positions: Australia reports net short positions, meaning long positions in the same security are netted against short positions to determine the reportable amount.
  • Covered short selling only: RG 196 reinforces that all short sales must be covered — sellers must have a securities lending arrangement in place before executing the sale.

The Short Position Reporting Process

How Reporting Works

  1. Position calculation: At the end of each trading day, each market participant calculates their net short position for each security by netting long holdings against short positions.
  2. Threshold check: If the net short position meets or exceeds the reporting threshold (0.01% of issued capital or $100,000, whichever is less), a report must be submitted.
  3. Submission to ASIC: Reports are submitted electronically to ASIC by 9:00 AM the following trading day.
  4. Aggregation: ASIC aggregates all individual reports for each security into a single total short position figure.
  5. Publication: The aggregated data is published on ASIC's website with a T+4 trading day delay.

Net Short Position vs Gross Short Position

A net short position is calculated by subtracting an entity's long positions from their short positions in the same security. For example, if a fund holds 100,000 shares long and has sold 150,000 shares short, their net short position is 50,000 shares.

Australia uses net short position reporting, which differs from some other jurisdictions that require gross short position reporting. The net approach provides a more accurate picture of an entity's directional exposure to a security.

The ASX Short Sales Report

The ASX short sales report (also known as the ASIC daily short position report) is published every trading day and contains the following data for each ASX-listed security with reportable short positions:

  • Product code: The ASX ticker symbol (e.g., BHP, CBA, CSL)
  • Product name: The full name of the listed security
  • Reported short positions: Total number of shares reported as short across all reporting entities
  • Total product in issue: The total number of shares on issue for the security
  • Short position percentage: Reported short positions as a percentage of total shares on issue

This daily short selling data is the foundation of short interest analysis in Australia and is the primary data source used by Shorted.com.au. The report covers all ASX-listed products that are approved for short selling.

ASX Approved Short Sell Products

Not all ASX-listed securities are eligible for short selling. The ASX maintains a list of approved short sell products — securities that meet certain liquidity and market capitalisation criteria. This list typically includes:

  • All S&P/ASX 200 index constituents
  • Other sufficiently liquid securities meeting ASX criteria
  • Exchange-traded funds (ETFs) listed on the ASX

The approved list is reviewed periodically and updated to reflect changes in market conditions and index composition. Securities must maintain adequate liquidity to remain on the approved list.

Covered vs Naked Short Selling in Australia

Australian law draws a clear distinction between covered short selling (legal) and naked short selling (illegal):

  • Covered short selling: The seller has borrowed the securities or has an arrangement to borrow them before executing the sale. This is the only legal form of short selling in Australia.
  • Naked short selling: The seller sells securities without first arranging to borrow them, creating a risk of settlement failure. This is prohibited under section 1020B of the Corporations Act 2001.

ASIC actively monitors for naked short selling and can take enforcement action including civil penalties, criminal prosecution, and banning orders against individuals or entities found to be engaging in naked short selling.

How to Interpret the Short Interest Report

When reviewing the ASX short interest report, consider the following:

  • Percentage levels: A short interest above 10% is generally considered elevated; above 20% is very high.
  • Trends over time: Focus on the direction and rate of change rather than a single day's snapshot.
  • T+4 lag: Remember the data is 4 trading days old — significant events may have changed positions since the reporting date.
  • Sector context: Some sectors (e.g., mining) naturally carry higher short interest than others (e.g., utilities).
  • Volume context: Consider the "days to cover" metric — how many days of average trading volume it would take for all shorts to cover.

Key Takeaways

  • The Corporations Act 2001 (sections 1020B, 1020AB, 1020AC) provides the legal framework for short selling regulation in Australia
  • ASIC Regulatory Guide 196 provides practical guidance on compliance and reporting
  • The reporting threshold is 0.01% of issued capital or $100,000, whichever is less
  • Naked short selling is prohibited; all short sales must be covered
  • ASIC publishes aggregated net short position data daily with a T+4 delay
  • The ASX short sales report is the primary source of short selling transparency in Australia

Frequently Asked Questions

What is the ASIC short position reporting threshold for net short position publication?

Under ASIC's reporting framework, market participants must report their net short positions when they reach 0.01% of a company's total issued capital or $100,000, whichever is less. ASIC then aggregates and publishes these reported positions daily as part of its short position publication. This low threshold ensures comprehensive coverage of short selling activity across ASX-listed securities.

What does the ASX short sales report contain and how is daily short selling data described?

The ASX short sales report is a daily publication containing aggregated short position data for all ASX-listed securities. It includes the product code (ASX ticker), full product name, total reported short positions (number of shares), total product in issue, and the percentage of total shares reported as short positions. Data is published with a T+4 trading day delay and is sourced from mandatory reports submitted by market participants to ASIC.

What does the Corporations Act 2001 section 1020B say about naked short selling prohibition?

Section 1020B of the Corporations Act 2001 prohibits naked short selling in Australia. It makes it illegal to sell financial products (known as 'section 1020B products') that the seller does not own or have a presently exercisable and unconditional right to vest. This means short sellers must have a securities lending arrangement in place before executing a short sale. Violations can result in civil and criminal penalties.

What is ASIC Regulatory Guide 196 on short selling?

ASIC Regulatory Guide 196 (RG 196) provides guidance on short selling disclosure and reporting obligations in Australia. It outlines the requirements for reporting net short positions, the 0.01% or $100,000 reporting threshold, the T+4 publication delay, and the distinction between covered and naked short selling. RG 196 implements the short selling transparency framework established under the Corporations Act 2001, including sections 1020AB (transaction reporting) and 1020AC (position reporting).

What are ASX approved short sell products and how does the short interest report work?

ASX approved short sell products are financial products that are eligible for short selling on the Australian Securities Exchange. These are typically ordinary shares of ASX-listed companies that meet liquidity and market capitalisation requirements. The ASX short interest report, published daily by ASIC, shows the aggregated net short positions for these products. Investors can use this report to identify heavily shorted stocks, track changes in short selling sentiment, and assess market positioning across different sectors and individual securities.

Continue Learning

What is Short Selling on the ASX?
A beginner's guide to short selling on the Australian Securities Exchange. Understand how short selling works, why investors do it, and the risks involved.
History of Short Selling on the ASX
Explore the evolution of short selling regulation and notable events in Australian markets. From early regulations to modern ASIC reporting requirements.