Requirements for disclosure and reporting of short sales

ASIC Market Advice - 7 April 2011

The purpose of this document is to provide information to assist brokers and their clients meet the short sale transaction reporting requirements.

Short sale transaction reporting

Where a person (a seller) executes a short sale and relies on an existing securities lending arrangement to have a ‘presently exercisable and unconditional right to vest’ the products in the buyer at the time of the sale, the sale of the products is a covered short sale. Covered short selling is permitted under the Corporations Act 2001 (Corporations Act). For a detailed overview of the short selling provisions of the Corporations Act, please see Regulatory Guide 196 Short selling (RG 196).

Sellers and brokers who make a short sale on a licensed market may be required to comply with the short sale transaction reporting requirements.

If a seller engages a broker to make a covered short sale on its behalf, the seller must report the particulars of the sale to the broker: s1020AB(3).

A broker must not make a short sale on a licensed market on behalf of a seller unless, before making the sale, the broker has asked the seller whether the requested sale is a short sale and has recorded in writing the seller’s answer: s1020AE.

Common industry reporting practice

Commonly, sellers and brokers who send and receive trading instructions using the widely used IRESS and FIX dealing systems facilitate compliance with their short sale transaction reporting obligations by agreeing that the seller will indicate to the broker, at the time of placing a sale order, whether the sale will be a short sale using specified IRESS or FIX field codes.

In this way, a seller can fulfil its obligation to give particulars of a short sale to its broker and the broker can fulfil its obligation to make enquiries of the seller’s sale order.

Short sale transaction reporting using IRESS field codes

A client, having confirmed their understanding of their short sale transaction reporting obligations, may agree in writing with their broker to inform the broker whether a sale order would be a short sale or a long sale by populating any of the IRESS fields ‘Instructions’, ‘External ID’ or ‘Transaction basis’ as follows:

Table 1: Mandatory fields using the IRESS systems

Sale type

IRESS system action

Long sale

Click 'Long sell' button

Short sale

Click 'Short sell' button

Short sale transaction reporting using FIX protocol tags

A client, having confirmed their understanding of their short sale transaction reporting obligations, may agree in writing with their broker to inform the broker whether a sale order would be a short sale or a long sale by populating FIX protocol tag 54 as follows:

Table 2: Mandatory tag 54 values using FIX compliant systems

Sale type

FIX

Long sale

2

Short sale

5

    Telephone orders

    When placing sale orders over the phone, sellers may meet their obligations and speed up the process by volunteering the type of sale order they are placing as follows:

    • 'Sell long'; or

    • 'Sell short'.

    This is Information Sheet 95 (INFO 95). Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

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    Last updated: 20/10/2014 04:31