Informist, Friday, Jan 5, 2024

--SEBI releases circular on framework for short-selling

--SEBI: Institutional investors to disclose short sales upfront

--SEBI norms allow short-selling to all investors

--SEBI: All F&O stocks eligible for short-selling

--SEBI says naked short selling not permitted

--SEBI says day trading not allowed for institutional investors

--SEBI: Exchanges to frame deterrent provisions for delivery failure

--SEBI: Exchanges to act vs brokers for short sales delivery failure

--SEBI: Securities lending, borrowing scheme needed to aid short sales

MUMBAI – The Securities and Exchange Board of India today revised the broad framework for short selling in the domestic equity cash market. Under the revisions specified in today's circular, SEBI said that institutional investors will henceforth disclose upfront at the time of order placement whether the transaction is a short sale or not.

Retail investors, too, would need to do the same, but not at the time of order placement. They "would be permitted to make a similar disclosure by the end of trading hours on the transaction day," according to SEBI.

Further, stock exchanges will have to consolidate all the short sales details scrip-wise and disseminate the same on their websites on a weekly basis.

The market regulator reiterated the details of the short selling framework in today's circular. The norms permit all investors--retail and institutional--to carry out short selling. The securities traded in the futures and options segment are eligible for short selling, it said.

SEBI reiterated the most important aspect of the norms that naked short selling is not permitted in the Indian securities market. It meant that any short seller has to continue to compulsorily deliver the shares at the time of settlement.

It further said that institutional investors will continue to be barred from doing day trading. Institutional investors, therefore, cannot square off their trades intra-day. Their transactions, according to SEBI, "would be grossed... at the custodians' level and the institutions would be required to fulfil their obligations on a gross basis."

The market regulator also reminded the brokers that failure to deliver shares at the time of settlement will attract strong action by the stock exchanges. This, according to the regulator, will "act as a sufficient deterrent against failure to deliver."

It further reiterated that securities lending and borrowing will be needed to provide impetus to short selling.

On Oct 16, SEBI issued a master circular for stock exchanges and clearing corporations which specified the provisions on the short selling framework. In today's circular, it added the requirements for upfront disclosure by institutional investors and weekly dissemination of short sales data by stock exchanges.  End

Reported by Rajesh Gajra

Edited by Maheswaran Parameswaran

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