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SEBI to allow short selling by institutions

Mutual fund intermediaries to be brought under SEBI ambit

CHENNAI: Securities and Exchange Board of India Chairman M. Damodaran on Friday outlined a series of steps, including allowing short selling of equities by institutional investors, bringing mutual fund intermediaries under its purview and hiking the position limit in the derivatives market, to make markets more attractive and safe.

The capital market regulator also reiterated that the deadline to comply with the Clause 49 of the listing agreement would not be extended beyond December 31 next and warned of tough action against companies that "step out'' of the rules.

Speaking at the 33rd National Convention of Company Secretaries here, Mr. Damodaran said short selling by institutions would be allowed before the end of the this calendar year. At present, only individuals could short sell. In other markets, institutions were allowed short sale of equities.

"A dichotomy exists in India. We will remove that,'' he said, adding that other steps such as securities lending and borrowing and physical settlement of transactions, instead of cash settlement, would be implemented simultaneously.

Mr. Damodaran said SEBI would bring all the mutual fund intermediaries, including agents and brokers, under its regulatory ambit. Already, some mutual funds had removed some agents from their list following the SEBI move, he pointed out.

On the derivatives market, Mr. Damodaran said the position limit would be increased to make both futures and options popular. ``There are position limits that are presently prescribed. These are at lower levels,'' he said.

In India, single stock futures had become very popular instrument. ``We are the largest single stock futures market in the world (at the NSE). Because of that we are not leaving anything for those who want to write options,'' Mr. Damodaran said, adding that this was the main reason for trading in options and index futures not picking up in India.

A SEBI committee was working on prescribing separate limits for these derivatives instruments and it was expected to come out with its suggestions next month, he said.

On the JJ Irani Committee's recommendation for having a "minimum'' of one-third independent directors on a company's board, he suggested this number could go up depending on the categorisation of companies.

To reduce timeline

Mr. Damodaran said the timeline for companies to raise money through IPO would be reduced in line with the international market. However, it would be done without diluting the regulations. — PTI, UNI

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