The Securities and Exchange Board of India on Thursday decided to permit short selling by institutional investors. Hitherto, only retail investors were allowed to short sell.
The markets regulator said it will put in place a securities lending and borrowing scheme to provide a mechanism for borrowing of securities to enable settlement of securities sold short.
Stock exchanges and depositories have been advised to put necessary systems in place in this regard.
The date of implementation will be communicated subsequently.
Short selling means selling a stock which the seller does not own at the time of trade.
Broad framework for short selling:
1. "Short selling" shall be defined as selling a stock which the seller does not own at the time of trade.
2. All classes of investors--retail and institutional--shall be permitted to short sell.
3. Naked short selling shall not be permitted and all investors would be required to honour their obligation of delivering the securities at the time of settlement.
4. No institutional investor shall be allowed to day trade--square-off transactions intra-day. In other words, all transactions would be grossed for institutional investors at the custodian level and the institutions would be required to fulfill their obligations on a gross basis. The custodians, however, would continue to settle their deliveries on a net basis with the stock exchanges.
5. The stock exchanges shall frame necessary uniform deterrent provisions and take appropriate action against the brokers for failure to deliver securities at the time of settlement which shall act as a sufficient deterrent against failure to deliver.
6. A scheme for Securities Lending and Borrowing shall be put in place to provide the necessary impetus to short sell, and its introduction shall be simultaneous with that of short selling by institutional investors.
7. Securities traded in F&O segment shall be eligible for short selling. SEBI may review the list of stocks eligible for short selling transactions from time to time.
8. Institutional investors shall disclose upfront at the time of placement of order whether the transaction is a short sale. However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.
9. 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 markets regulator said it will put in place a securities lending and borrowing scheme to provide a mechanism for borrowing of securities to enable settlement of securities sold short.
Stock exchanges and depositories have been advised to put necessary systems in place in this regard.
The date of implementation will be communicated subsequently.
Short selling means selling a stock which the seller does not own at the time of trade.
Broad framework for short selling:
1. "Short selling" shall be defined as selling a stock which the seller does not own at the time of trade.
2. All classes of investors--retail and institutional--shall be permitted to short sell.
3. Naked short selling shall not be permitted and all investors would be required to honour their obligation of delivering the securities at the time of settlement.
4. No institutional investor shall be allowed to day trade--square-off transactions intra-day. In other words, all transactions would be grossed for institutional investors at the custodian level and the institutions would be required to fulfill their obligations on a gross basis. The custodians, however, would continue to settle their deliveries on a net basis with the stock exchanges.
5. The stock exchanges shall frame necessary uniform deterrent provisions and take appropriate action against the brokers for failure to deliver securities at the time of settlement which shall act as a sufficient deterrent against failure to deliver.
6. A scheme for Securities Lending and Borrowing shall be put in place to provide the necessary impetus to short sell, and its introduction shall be simultaneous with that of short selling by institutional investors.
7. Securities traded in F&O segment shall be eligible for short selling. SEBI may review the list of stocks eligible for short selling transactions from time to time.
8. Institutional investors shall disclose upfront at the time of placement of order whether the transaction is a short sale. However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.
9. 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.
