ASIC are idiots. Plain and simple.
If they think a ban on short selling will lower volatility and stop those 'nasty' hedge funds from profiteering from a bear market they're wrong. It's like they set their fiscal policy from whatever David Koch is saying on Sunrise.
Let's say you run a conservative little portfolio and you're long a few RIO.AX calls and you want to hedge your position by shorting some stock. You'd be doing the low risk, conservative thing, but now that those geniuses at ASIC have banned short selling, they prevent you from hedging your position, thereby increasing your risk, potentially forcing you to exit your position or even worse to sustain massive preventable loses.
How does ASIC decide what price level in the market is low enough that they can ban short selling? How do they know what represents fair values? They don't. What if the market is overpriced? (which it is)
If you run a super fund and you're getting smashed on your long market position and you want to buy a few index puts, are ASIC going to ban that too?
Seriously, the petty jealousy from the grubby little sneaks at ASIC has gone way too far and they have massively overstepped the mark. Their stupid over reaction caused a massive bounce in the market today (up more than 4%) and clearly didn't lower volatility.
We used to have a relatively free market Krudd and Co. The only other place they banned all forms of shorting was in Russia.
Next thing we'll be standing in line for soup and Brain surgeons will be paid the same as Ditch Diggers.
Why doesn't ASIC ban long only trading because a nasty hedge fund might buy up all the stock, artificially forcing it higher? That's just not fair, profiting from a rising market. They've got to start thinking.