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Short-selling from April 21

MUMBAI: The Securities and Exchange Board of India (SEBI) has decided to operationalise short-selling by institutional investors and a full-fledged securities lending and borrowing scheme for all market participants with effect from April 21.

SEBI, in a note, has advised all stock exchanges and depositories to make necessary amendments to the relevant bye-laws, rules and regulations for implementing the short-selling and securities lending and borrowing scheme. It also asked them to bring the provisions of this circular to the notice of the member brokers and clearing members, depository participants and also disseminate the same on their website. It also asked the stock exchanges and depositories to communicate to SEBI, the status of the implementation .

In order to provide a level playing field to all the investors in the cash market all institutional trades in the cash market would be subject to payment of margins as applicable to transactions of other investors, it said. This would be implemented with effect from April 21.

To begin with all institutional trades would be margined on a T+1 basis with margin being collected from the custodian upon confirmation of the trade. Subsequently, with effect from June 16, the collection of margins would move to an upfront basis.

PTI reports:

Initially, securities traded in the Futures and Options segment will be eligible for short-selling and SEBI may review the list of stocks that are eligible for short-selling transactions from time to time.

SEBI had banned short-selling in the aftermath of Ketan Parekh scam in 2001 as it feared a speculative sell-off could exert massive bear pressure on stock market. Retail investors, however, are already allowed to short-sell securities.

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