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ASIC Class Order [CO 08/751]

Authoritative Version
CO 08/751 Orders/ASIC Class Orders as amended, taking into account amendments up to ASIC Class Order [CO 08/753]
This Class Order grants various exemptions from the Corporations Act 2001 in relation to facilities operated by Issuers relating to the sale and purchase of quoted shares and quoted interests in managed investment schemes.
Administered by: Treasury
Registered 25 May 2012
Start Date 22 Sep 2008
End Date 22 Sep 2008
Date of repeal 11 Dec 2009
Repealed by ASIC Class Order [CO 09/1063]

ASIC Class Order [CO 08/751]

Covered short sales

This instrument has effect under s1020F(1)(c) of the Corporations Act 2001

This compilation was prepared on 15 April 2011 taking into account amendments up to [CO 08/753]. See the table at the end of this class order.

Prepared by the Australian Securities and Investments Commission.

Australian Securities and Investments Commission
Corporations Act 2001 — Paragraph 1020F(1)(c) — Declaration

Enabling legislation

1.    The Australian Securities and Investments Commission makes this instrument under paragraph 1020F(1)(c) of the Corporations Act 2001 (the Act).

Title

2.    This instrument is ASIC Class Order [CO 08/751].

Commencement

3.    This instrument commences on the date it is registered under the Legislative Instruments Act 2003.

Note: An instrument is registered when it is recorded on the Federal Register of Legislative Instruments (FRLI) in electronic form: see Legislative Instruments Act 2003, s 4 (definition of register).  The FRLI may be accessed at http://www.frli.gov.au/.

Declaration

4.    Part 7.9 applies in relation to all persons as if Division 6 of that Part were modified or varied by inserting after section 1020B:

1020BC Reporting of covered short selling on a licensed market

(1)   This section applies in relation to a sale of section 1020B products by a person in this jurisdiction where:

(a)   the sale is made on a licensed market; and

(b)   at the time of the sale:

(i)      the person has or, if the person is selling on behalf of another person, that other person has; or

(ii)     the person believes on reasonable grounds that the person has, or if the person is selling on behalf of another person, that other person has,

a presently exercisable and unconditional right to vest the products in the buyer because of a securities lending arrangement entered into before that time.

(2)   A person who requests a financial services licensee to make the sale of section 1020B products must, when making the request, inform the licensee that the sale is a short sale to which this section applies.

(3)   A financial services licensee who is a participant on the market must, before selling section 1020B products on behalf of another person, ask the other person whether the sale would be a short sale to which this section applies. The licensee must record the answer in written or electronic form before selling the products.

(4)   A financial services licensee who is a participant on the market must by no later than 9.00am on each trading day inform the market operator of their net covered short position in section 1020B products as at 7:00pm on the previous trading day. 

(5)   In this section:

net covered short position means, in relation to a class of section 1020B products sold by a financial services licensee, the amount worked out according to the following formula:

borrowed products sold — borrowed products settled

where:

borrowed products sold means the total number of products in the class the sale of which is covered by subsection (1) that have been sold by the licensee since the commencement of this section; and

borrowed products settled means the total number of products in the class, the sale of which is covered by subsection (1) and in respect of which products have been vested in the buyer since the commencement of this section.

section 1020B products has the meaning given by subsection 1020B(1).

securities lending arrangement means an arrangement under which:

(a)   one entity (the lender) agrees that it will:

(i)      deliver particular section 1020B products, to another entity (the borrower) or to an entity nominated by the borrower; and

(ii)     vest title in those products in the entity to which they are delivered; and

(b)   the borrower agrees that it will, after the lender does the things mentioned in paragraph (a):

(i)      deliver the products (or equivalent products) to the lender or to an entity nominated by the lender; and

(ii)     vest title in those products (or those equivalent products) in the entity to which they are delivered.

sell has a meaning affected by subsection 1020B(7).”.

1020BD   Prohibition of covered short selling of certain securities

(1)   Notwithstanding sections 1020B and 1020BC, a person must not sell a security or managed investment product that is in a class of financial products that is able to be traded on a licensed market if at the time of the sale:

(a)   the person has or, if the person is selling on behalf of another person, that other person has; or

(b)   the person believes on reasonable grounds that the person has, or if the person is selling on behalf of another person, that other person has,

a presently exercisable and unconditional right to vest the security or product in the buyer because of a securities lending arrangement entered into before that time.

(2)   Subsection (1) does not apply in relation to a sale of a security or product by a person who is a Market Maker or Warrant Market Maker for the purposes of managing, avoiding or limiting the financial consequences of issuing or holding a derivative in the course of the person’s market making activities.

Note:    Subsection (2) enables a market maker to make covered short sales to hedge derivative positions that have entered into in the course of their market activities to the extent that they are contemplated by the ASX Market Rules.

(3)   In this section:

able to be traded includes (in addition to the meaning given by section 761A), in relation to a security or managed investment product and a market, traded on the market under terms by which the security or product must be transferred together with one or more other financial products.

Market Maker has the same meaning as in the ASX Market Rules as at 19 September 2008.

market making activities means the acquisition or disposal of derivatives by a person acting in the capacity of a Market Maker or Warrant Market Maker in the circumstances and manner covered by sections 10 or 23 of the ASX Market Rules as at 19 September 2008.

securities lending arrangement has the same meaning as in section 1020BC.

sell has a meaning affected by subsection 1020B(7).

Warrant Market Maker has the same meaning as in the ASX Market Rules as at 19 September 2008.

 

Notes to ASIC Class Order [CO 08/751]

Note 1

ASIC Class Order [CO 08/751] (in force under s1020F(1)(c) of the Corporations Act 2001) as shown in this compilation comprises that Class Order amended as indicated in the tables below.

Table of Instruments

Instrument number

Date of FRLI registration

Date of commencement

Application, saving or transitional provisions

[CO 08/751]

22/9/2008 (see F2008L03520)

22/9/2008

 

[CO 08/752]

22/9/2008 (see F2008L03525)

22/9/2008

-

[CO 08/753]

22/9/2008 (see F2008L03526)

22/9/2008

-

Table of Amendments

ad. = added or inserted     am. = amended     rep. = repealed     rs. = repealed and substituted

Provision affected

How affected

Notional s1020BC(3)............

am. [CO 08/752]

Notional s1020BD.................

ad. [CO 08/752]

 

am. [CO 08/753]