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SEBI permits short selling by institutional investors

SEBI vide its circular dated December 20, 2007, has decided to permit short selling by institutional investors. Hitherto, only retail investors were allowed to short sell. Now all classes of investors are permitted to short sell.

2. In order to provide a mechanism for borrowing of securities to enable settlement of securities sold short, it has also been decided to put in place a full-fledged securities lending and borrowing (SLB) scheme for all market participants in the Indian securities market under the over-all framework of “Securities Lending Scheme, 1997” of SEBI.

3. The Stock Exchanges shall issue the necessary guidelines in this regard and shall put in place systems to operationalise the above mechanisms for short selling and SLB. The stock exchanges shall also ensure that all appropriate trading and settlement practices as well as surveillance and risk containment measures, etc. are made applicable and implemented in this regard.

4. The Stock Exchanges and the Depositories are advised to put necessary systems in place so as to distinguish the lending and borrowing transactions executed in the framework specified in the annexure from the normal market transactions in the demat system.

5. The date of implementation of this circular will be communicated by SEBI subsequently.

6. The Stock Exchanges and the Depositories are also advised to :

6.1. test the necessary software/systems and remove any glitches in its operation well before the commencement date to avoid any problems in the live environment.

6.2. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.

6.3. bring the provisions of this circular to the notice of the member brokers/clearing members, depository participants and also disseminate the same on their website.

6.4. communicate to SEBI, the status of the implementation of the provisions of this circular in the Monthly Development Report.

Amendments in Disclosure and Investor Protection (DIP) guidelines here
Guidelines on Offshore Derivative Instruments (Participatory Notes) here
SEBI simplifies guidelines on corporate bonds here
SEBI Board approves New Derivative Products here



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