The XJO is currently down 40 options (-0.9%), holding around 4250.
The selloff is widespread with most sectors weaker; financials, energy and industrials are hardest hit, whilst consumer staples and telcos are the best performers.
In company news, Fortescue today hit a fresh five-month high amid speculation it may disclose a takeover bid when it releases first-half results on Thursday.
Elsewhere, GUD Holdings is down more than 6% after releasing FY12 half-year results which have disappointed the market.
In economic news, the latest NAB business survey showed business conditions moved into positive territory in January, posting a rise of two index points.
Business confidence rose one point, to plus four points, with the NAB noting confidence was relatively firm in January but employment remains a problem.
Around the region, Asian markets are all weaker; the Hang Seng is down 0.2% whilst the Nikkei is off 0.3%.