ASIC has lifted the ban on covered short selling of financial securities, effective from 10am, 25 May.
Covered short selling of securities was temporarily banned on 21 September 2008, in light of extreme market volatility.
In a statement, the regulator said it has reviewed market conditions and determined that, "the balance between market efficiency and potential systemic concern has now moved in favour of the ban being lifted."
However, as a result of ongoing financial instability, ASIC has reserved its right to reinstate the ban at any time without consultation, in accordance with new powers given the regulator under the Corporations (Amendment) Short Selling Act 2008.
ASIC will also continue to monitor short selling activity by participants in the market. Daily reporting of gross short sales will continue, as will the publication to the market of aggregate short sales the day after trading.