sebi obligations on short selling: Sebi prohibits naked short selling in the securities market.
Short selling is selling shares that the seller does not own at the time of the transaction. Both retail and institutional investors can short sell securities.
However, short selling is not permitted under regulations in the Indian securities market. Short sellers must honor their obligation to deliver securities at the time of settlement.
“This is a repeat of the previous rules issued in 2007,” said Sandeep Parekh, founder, Finsec Law Advisors. “They have now explicitly included this in their master circular.”
A master prototype is a compilation of all previous prototypes.
Institutional investors will not be allowed to engage in same-day trading, where they finalize transactions for the day, Sebi said.
The regulator said securities traded in the futures and options sector would be subject to short selling. The list of stocks eligible for short selling is revised from time to time. Institutional investors must disclose in advance whether the transaction is short selling when placing an order. However, retail investors will be permitted to make similar disclosures till the end of trading hours on the trading day, Sebi said.
“Brokers must collect details of short positions on each instrument, collate the data and upload it to the stock exchange before the start of trading on the next trading day,” Sebi said.
The stock exchange then consolidates that information and distributes it on its website for public viewing on a weekly basis. It said the frequency of such disclosures would be reviewed from time to time.
