Aussie Pension Suspends Its Short Selling-related Stock Program

The A$85 billion ($53 billion) UniSuper pension fund announced Monday it has indefinitely suspended its stock lending program, citing the restrictions of short sales as being part of an effort that will help ease market conditions back to normal.

“In a normally functioning market, we’re comfortable lending our shares as we genuinely believe that it adds to market efficiency. The ability to short sell adds to liquidity and price discovery in an orderly market. However, we are now in a market gripped by panic and we believe that restricting the ability to short sell is in the best interest of promoting a more orderly market,” Chief Investment Officer John Pearce said.

The fund’s custodian, BNP Paribas, has been ordered to immediately retract all shares currently out on loan, without exception.

The move by UniSuper follows that of a similar action by Japan’s $1.49 trillion Government Pension Investment Fund (GPIF), which suspended its stock lending program short selling on its conclusion that the trading method creates a trading gap that is “inconsistent” with its stewardship responsibilities, which include improving the long-term value of investee companies.

Tesla and SpaceX CEO Elon Musk responded to the Unisuper news with: “Bravo, right thing to do! Short selling should be illegal.” Musk is a long-time critic of short selling, which ultimately bets on the shares of a company’s stock price falling. Tesla is one of the most-shorted stocks in the United States, regularly having the equivalent of 20% of its outstanding shares in shorted shares. “They’re jerks who want us to die,” Musk said in a Rolling Stone interview several years ago.

International markets continued their sell-off around the world, and the ASX 200 index closed down 9.7% on the eve of the pension’s announcement, while the S&P 500 fell nearly 12%.