
Sebi looking at proposal to ease curbs on short-selling in stocks
Securities and Exchange Board of India (Sebi) is considering a plan to ease restrictions on short-selling — a trading strategy betting on a decline in prices of an asset-- on most stocks. In a recent meeting of the regulator-appointed secondary market advisory committee (SMAC), the proposal was discussed after broking industry officials highlighted that the market watchdog's January 2024 proposal to bar short-selling in stocks that are not in the future and options segment had caused uncertainty.
The new recommendations, if implemented, could allow short-selling in all stocks, barring those in the trade-to-trade, or T2T, segment, said sources with direct knowledge of the matter. Sebi officials, during the discussions, agreed to give the plan another thought, they said. An email to Sebi went unanswered till press time.
Sources said a ban on short-selling in non-F&O stocks could shrink liquidity further after trading volumes have already taken a hit following the recent regulatory restrictions and weakness in the market.
Short-selling means selling a stock that the seller does not own at the time of trade. Short-sold shares should be bought back on the same trading day and cannot be carried forward or held overnight.
Brokers have recently been seeking greater clarity on the implementation of Sebi's January 2024 rules. «If the ban on short selling in non-F&O stocks is enforced strictly, it could lead to a further decline in cash market volumes,» said the CEO of top broking firm.
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