SEBI allows short selling by institutional investors
Stock Exchange Board of India (SEBI) decided to allow short selling by institutional investors, hitherto only retail investors were allowed to short sell.
With a view to provide a mechanism for borrowing of securities to enable settlement of securities sold short, it has also been decided to put in place a full-fledged securities lending and borrowing (SLB) scheme for all market participants in the Indian securities market.
The Stock Exchanges and the Depositories have been advised to put necessary systems in place in this regard.
According to the broad framework announced by SEBI, `Short Selling` will be defined as selling a stock that the seller does not own at the time of trade. All classes of investors, viz., retail and institutional investors, will be permitted to short sell.
Further , naked short selling will not be permitted in the Indian securities market and accordingly, all investors would be required to mandatory honour their obligation of delivering the securities at the time of settlement. No institutional investor will be allowed to do day trading i.e., square off their transactions intra-day.
Appropriate action needs to be taken against the brokers for failure to deliver securities at the time of settlement, which shall act as a sufficient deterrent against failure to deliver.To provide with necessary impetus to short sell, a scheme for Securities Lending and Borrowing (SLB) should be in place simultaneous with the introduction of short selling by institutional investors.Those securities that will be traded in F&O segment will be eligible for short selling. Also, at the time of placement of order whether the transaction is a short sale, institutional investors need to disclose upfront
However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.
The brokers shall be mandated to collect the details on scrip-wise short sell positions, collate the data and upload it to the stock exchanges before the commencement of trading on the following trading day. The stock exchanges shall then consolidate such information and disseminate the same on their websites for the information of the public on a weekly basis.The frequency of such disclosure may be reviewed from time to time with
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