The Securities and Exchange Board of India (SEBI) said on Friday that all institutional investors will have to disclose their short-sale transactions upfront at the time of order placement. Retail investors will have to make a similar disclosure by the end of the trading hours on the transaction day.
The move follows the Supreme Court ruling on petitions seeking an investigation into the alleged manipulation of Adani Group stocks. The apex court has asked SEBI to probe if there were short positions taken in the market at the time of publication of the Hindenburg report that were against the law.
The requirement will enhance transparency and aid informed decision-making among market participants, said experts. “You can borrow and short-sell stocks. But if you do, you must reveal that you did so when you trade. Exchanges will display aggregate short interest on each stock every day,” Deepak Shenoy, CEO of Capitalmind, a portfolio manager, said in a post on X.
Brokers will be required to collect and upload scrip-wise short-sell positions to exchanges before the next trading day. This will increase visibility into short-selling activity, allow for better monitoring by regulators, and lead to more stable prices, said experts.
SEBI said that a scheme for securities lending and borrowing (SLB) will be put in place to provide the necessary impetus to short sell. “The introduction of a full-fledged securities lending and borrowing scheme shall be simultaneous with the introduction of short selling by institutional investors,” the regulator said.
Short selling involves selling a stock that the seller does not own at the time of trade.
Currently, naked short selling is not allowed in the Indian securities market, and institutional investors are not allowed to square off their transactions intra-day.
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