Shorting update

A lot of discussion taking place on shorting given the truly bizzare movements over the weekend, with lots of people asking question.. what the hell?

All forms of short selling have been banned:

• Covered shorting: selling stock you have borrowed from someone else. They'll want a fee to allow you to do this, and you need to return the stock when they want it back.
  
• Naked shorting: selling stock you, well, don't have. Many in this category just cop the fail fees instead of bothering to borrow the stock. These go into the coffers of exchanges.
  

The following exemptions apply:

• Market makers
• Exchange traded options, warrants and exchange traded funds.

CFD providers in Australia are still providing short capability, since the product is over-the-counter and not exchange based. However, it should remain a fairly irrelevant force amidst the torrent of short-squeeze / short-covering, as market participants unable to defend their existing short positions with more short selling may be inclined to buy - just to get out. Remember that shorting is a very risky strategy, as your losses are theoretically unlimited. At least buying a stock has a limited downside (100%).

Note that clients of Minc Online are not directly impacted by these changes. Since client holding are registered on CHESS and sponsored by Minc as broker, there is no risk of naked short selling. Of course clients now have the legal obligation to ensure they do not sell any stock that is transferred to Minc as a result of borrowing from another party.