06-Jan-2024
2 mins read
The Securities and Exchange Board of India (SEBI) has introduced significant updates to its short-selling regulations, aligning them with provisions from a 2007 circular. In a recent move, SEBI issued a circular on January 5, mandating institutional investors to declare upfront if their transactions are short sales. Retail investors are given the flexibility to make this declaration by the end of the trading day.
Enhanced Transparency in Short Selling
These updates come in the wake of the Supreme Court’s decision on the investigation into alleged market manipulations involving Adani Group stocks. In response, SEBI has sought to enhance market transparency and protect investor interests. Brokers and stock exchanges now have the responsibility to gather and publicise data on short-sell positions, providing weekly updates on their websites. This measure is expected to offer greater clarity to the public on market activities.
Updated Provisions for Institutional and Retail Investors
Under the new framework, institutional investors must disclose at the time of order placement if they are engaging in a short sale. Retail investors, on the other hand, have the leeway to declare such transactions by the end of trading hours on the day of the transaction. This dual approach aims to balance the immediacy required for institutional trades with the flexibility needed for retail investors.
Clarifying the Framework for Institutional Investors
SEBI’s circular also reiterates the existing norms for institutional investors. These investors are not permitted to engage in day trading, meaning they cannot square off their transactions within the same trading day. All transactions must be grossed at the custodian level, and institutions are required to meet their obligations on a gross basis, although custodians may continue to settle deliveries on a net basis with stock exchanges.
A Step Towards Market Integrity
The latest updates from SEBI represent a significant step towards ensuring market integrity and investor protection. By aligning with the 2007 framework and enhancing transparency through public disclosures, SEBI aims to foster a more robust and accountable trading environment in India’s stock market.