All classes of investors would be allowed to short sell, said a release from the stock market regulator on Thursday. The Securities and Exchange Board of India (SEBI) has also issued a broad framework for securities lending and borrowing (SLB) scheme, although it has not specified the date when both the facilities would be implemented. “The date of implementation of this circular will be communicated by SEBI subsequently,” the release said.
Short selling denotes selling a stock that one does not own at the time of the trade. SLB is a mechanism that enables investors who have short sold to borrow those securities from a willing lender at a fixed cost.
“It (short sales) is a good balancing force and a major facility for people with large holdings,” said Deena Mehta, managing director of Asit. C. Mehta Investments. Short selling would increase market participation and improve liquidity say market participants. “This can curb runaway movement in share prices,” said Lalit Thakkar, director, research, Angel Broking. <b1>
To begin with, all stocks in the futures and options (F&O) segment would be eligible for short selling, the regulator's note said. All sales should be settled through delivery at the time of settlement, the regulator mandates.
Institutional investors have to disclose upfront that a transaction is a short sale and retail investors have to disclose it by the end of the transaction day. All information pertaining to short sales is to be collated and disseminated by the exchanges on a weekly basis.