SYDNEY, AUSTRALIA - AUSTRALIA'S corporate watchdog on Tuesday extended a ban on covered short selling of shares until next month, saying the volatile market needed more time to settle.

The Australian Securities and Investments Commission (ASIC) imposed the ban on September 21 followed similar crackdowns in the US and some European markets as regulators acted to defend troubled financial services sectors.

On Tuesday it extended the ban for 28 days until November 28, although a ban on covered short selling of financial stocks will continue until January 27, 2009, in line with similar restrictions in Britain.

ASIC chairman Tony D'Aloisio said the measures remained necessary as market conditions were still difficult.

While the various government actions and packages introduced in Australia and overseas are positive developments, they are yet to work through the financial system,' he said.

'The financial markets are still fragile, so we feel the reopening of covered short sales should be done in stages and in a measured way over an extended period and have regard to systemic issues, particularly for financial stocks,' he said.

Short-selling occurs when investors sell shares they do not yet own in order to profit later from an anticipated fall in prices - often contributing to the price fall.