The ASX is already regulated by the government. ASIC, RBA, APRA. Short selling regulations would be a matter for ASIC (ie the government) I would think - ASX would always just operate the market as per the regulations set.
In fact stock short selling is not even really facilitated by the ASX - it's the custodians and institutional brokers who created and run the securities lending market that enables covered short selling (which is all you can do under current rules - thank goodness. Remember uncovered shorting used to be allowed before the GFC!). ASX is only involved in short selling in that it facilitates the execution and settlement of the "short sale" transactions, just as they do any others, with no real knowledge of whether the sale is short or not (at the time of execution anyway). As a part of this behind the scenes through CHESS enables the holders of securities and the borrowers to register their lending so that those executed short sales can actually settle.
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