Sebi bans naked short selling in securities market
Sebi) on Friday reiterated its existing rules on short selling by including its 2007 circular on the subject in the master circular.
Short selling involved selling a stock which the seller doesn’t own at the time of trade. Both retail and institutional investors are allowed to short sell securities.
But rules do not allow naked short selling in Indian securities market.
Short sellers must honour their obligation of delivering the securities at the time of settlement,
“It’s a reiteration of the earlier rules issued in 2007. They have now explicitly included it in the master circular,” said Sandeep Parekh, founder of Finsec Law Advisors.
Master circular is a compilation of all previous circulars.
Institutional investors wouldn’t be allowed to do day trading, where in they square- off their transactions intra-day, Sebi said.
The regulator said securities traded in the futures and options segment would be eligible for short selling.
The list of stocks eligible for short selling would be revised from time to time.
Institutional investors should 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, Sebi said.
“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,” Sebi said.
Stock exchanges would then consolidate such information and disseminate the same on their websites for the information of the public on a weekly basis.
