SEBI introduce new guidelines for short selling transactions
08 January 2024 India
Image: Pierre
The Securities and Exchange Board of India (SEBI) has released new guidelines for short selling in the Indian securities market.
These rules build on SEBI’s ‘Short-Selling and Securities Lending and Borrowing Scheme’ that was implemented in October 2023.
Under the new guidelines, all classes of investors, including retail and institutional investors, are permitted to short sell.
However, to ensure transparency and increase market credibility, the framework imposes stringent measures around disclosure practices.
Naked short selling is not permitted in the market, and all investors are required to deliver the securities at the time of settlement.
Institutional investors are required to disclose upfront whether the transaction is a short sale at the time of placing the trade order. Retail investors, however, are permitted to make a similar disclosure by the end of the trading hours on the transaction day.
SEBI indicates that failure to comply with the guidelines will result in ‘appropriate action’ from the stock exchanges, in a bid to mitigate risks associated with short selling.
Hruda Ranjan Sahoo, deputy general manager of SEBI, says that the guidelines are issued “to protect the interests of investors in securities and to promote the development
of, and to regulate, the securities market.”
These rules build on SEBI’s ‘Short-Selling and Securities Lending and Borrowing Scheme’ that was implemented in October 2023.
Under the new guidelines, all classes of investors, including retail and institutional investors, are permitted to short sell.
However, to ensure transparency and increase market credibility, the framework imposes stringent measures around disclosure practices.
Naked short selling is not permitted in the market, and all investors are required to deliver the securities at the time of settlement.
Institutional investors are required to disclose upfront whether the transaction is a short sale at the time of placing the trade order. Retail investors, however, are permitted to make a similar disclosure by the end of the trading hours on the transaction day.
SEBI indicates that failure to comply with the guidelines will result in ‘appropriate action’ from the stock exchanges, in a bid to mitigate risks associated with short selling.
Hruda Ranjan Sahoo, deputy general manager of SEBI, says that the guidelines are issued “to protect the interests of investors in securities and to promote the development
of, and to regulate, the securities market.”
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