AUSTRALIA, May 25 – The Australian Securities and Investments Commission (ASIC) warned it would keep a close watch on short-selling activity and reinstate the ban if trading threatened stability.
"ASIC has reviewed market conditions and considers that the balance between market efficiency and potential systemic concern has now moved in favour of the ban being lifted," it said in a statement.
"The global financial crisis and global recession continues to place pressure on Australia\’s markets.
"ASIC will not hesitate to re-impose the ban immediately and without consultation if it considers market conditions warrant such action," it said.
Short-selling occurs when investors sell shares they do not yet own in order to profit later from an anticipated fall in prices — often contributing to the price fall.
The ban was imposed in September, following a similar crackdown in the US and some European markets as regulators acted to protect troubled financial services sectors.