Senator Nick Sherry, Minister for Superannuation and Corporate Law, has released a draft of the Corporations Amendment (Short Selling) Bill which will require the disclosure of covered short sale transactions on Australian financial markets.

The draft Bill will have a four week exposure period in preparation for the possible future removal of the current halt on most types of covered short selling put in place by ASIC and ASX from 22 September.

The draft legislation will address any ambiguity around covered short selling and will require the disclosure of transactions where a seller has entered into a securities lending arrangement to cover a sale.

In particular, covered short sales would have to be disclosed by sellers to a financial services licensee who in turn would be required to disclose the position to the market operator. Financial services licensees trading on their own behalf will be required to disclose covered short sales directly to the market operator. It will be an offence if a seller or financial services licensee does not disclose details of a covered short sale.

The draft legislation will be supplemented by regulations covering more detailed aspects of disclosure requirements and will be able to reflect changes in markets and trading behaviour.

The draft legislation is open for public comment until 21 October 2008 to facilitate introduction of the legislation into Parliament before the end of the current session.