ASIC extends short selling relief for precious metal ETFs

ASIC extends short selling relief for precious metal ETFs

ASIC Extends Short Selling Relief for ETFs Amid Market Growth

The Australian Securities and Investments Commission (ASIC) has expanded regulatory relief to permit named short selling in exchange-traded funds (ETFs) and managed funds, supporting liquidity and market efficiency. This legislative relief, effective under a new instrument, allows ETF market makers to execute short sales provided they meet conditions outlined in RG 196.46, which governs market conduct according to ASIC's announcement.

The relief addresses prior limitations, as ASIC had historically granted individual "no-action" positions since 2008 for naked short sales in specific ETFs. By formalizing this framework, ASIC aims to reduce settlement risk, as market makers can apply to fund issuers to create new units to cover short positions as reported. The regulator emphasized that the measure enhances market-making activities, ensuring tighter bid-ask spreads and improved investor access according to regulatory guidance.

The update aligns with ASIC's broader efforts to streamline regulations for exchange-traded products (ETPs), including the release of Regulatory Guide 282 (RG 282) in November 2025. This guide consolidates obligations for ETP issuers, market operators, and investors, reflecting industry feedback and evolving market practices as detailed in the new guide. It covers portfolio disclosures, product naming standards, and liquidity requirements, addressing complexities in a sector that saw Australian ETF assets surge to $200 billion in 2024—a 20-fold increase over a decade according to ASIC data.

The relief also extends to deferred settlement trading, IPO sell-downs, and global firms' ability to calculate short positions using a standardized calendar time as stated by ASIC. ASIC stated these measures respond to industry needs while maintaining market integrity and consumer protection objectives according to official communications.

With the ETP market's continued growth, ASIC's actions aim to balance regulatory clarity with market resilience, ensuring participants can navigate the sector's complexities effectively. Investors are advised to review product disclosures and market-making arrangements under RG 282 for updated compliance standards as recommended.

Word count: 300