New online system for short selling

Online stockbroker Trader Dealer has launched an online stock borrowing system for investors wanting to short sell.

The fully automated system, claimed to be a first, allows investors to sell short, but the sale is processed as an ordinary trade.

Normally, an investor is only allowed to pick stocks from the ASX’s Approved Short Selling list. On picking a stock, the investor must inform their stockbroker that they are placing a short position and the broker takes on the responsibility of finding securities to settle the sale.

Trader Dealer managing director Anthony Blumberg said investors using the new short system are not restricted to the ASX list.

The order is processed as a normal sale, which means investors can technically short any stock on the exchange, he said.

The Trader Dealer system automatically matches an investor with the appropriate amount of stock before the sale is placed on the market.

“When the investor wishes to sell, they request to borrow securities online, which are quickly transferred into their account, subject to a $50 borrowing fee,” Blumberg said.

“The securities can then be sold with the intention of buying them back later at a lower price. The investor owns the securities, which means the order is processed as a normal sale,” he said.

“It does not technically go through as a short sale, but the system allows investors to replicate the process of short selling.”

Blumberg said the current climate on the stock market is ideal for short selling because of threats of inflation, uncertainty about interest rates and the high volatility in the market.

“It can be extremely difficult for investors to pick short positions during a bull market, as they are going against market momentum,” he said.

“But with a market that is uncertain and volatile, there is more opportunity to find stocks that are set to fall in price, and this system gives investors a cheaper way of shorting the market.”