Securities Exchange Board of India (SEBI) has granted permission for short-selling to investors across all categories. However, the regulator clarified that naked short-selling would not be permitted. The framework disclosed that all stocks trading in the futures and options segment are eligible for short-selling.
Short-selling involves the practice of selling a stock that the seller does not currently own at the time of the transaction.
SEBI emphasized that in the Indian securities market, naked short-selling is strictly prohibited. Consequently, all investors are obligated to fulfill their obligation of delivering the securities during settlement.
In addition, the new framework introduces a prohibition on institutional investors engaging in day trading. Transactions for institutional investors will be aggregated at the custodians’ level, maintaining the settlement of deliveries on a net basis with stock exchanges.
SEBI highlighted that securities traded in the F&O segment are eligible for short-selling, and the regulator may periodically review the list of stocks available for such transactions.
The regulations also mandate that institutional investors disclose whether a transaction is a short sale when placing an order. Conversely, retail investors have the flexibility to make a similar disclosure by the close of the trading day.
Stock exchanges have been instructed by SEBI to establish consistent deterrent provisions and take appropriate action against brokers failing to deliver securities during settlement. The implementation of a Securities Lending and Borrowing (SLB) scheme is set to encourage short-selling, aligning with SEBI’s comprehensive framework.
Brokers are now required to collect details on scrip-wise short-sell positions and upload them to stock exchanges before the commencement of trading on the subsequent trading day. The frequency of such disclosures is subject to periodic review with SEBI’s approval.
