The Securities Exchange Board of India (SEBI), on 5 January, announced that investors across all categories will now be allowed for short-selling. Short-selling is the sale of a stock which a person does not own at the time of trade but has merely borrowed. The aim is to profit from a decline in the asset’s price by later buying the shares at a lower cost to cover the short position.
- SEBI also announced that naked short-selling not be permitted in the Indian securities market. Naked short-selling is when a trader sells shares in some asset without first borrowing them or ensuring they could be borrowed.
- The markets regulator further informed that all stocks that trade in the futures and options segment are eligible for short-selling.
- According to the just-released SEBI circular, all investors would be required to mandatorily honor their obligation of delivering the securities at the time of settlement.
- The SEBI circular further states institutional investors are prohibited from engaging in day trading, meaning they are not allowed to square off their transactions within the same trading day.
- According to the regulations, institutional investors must disclose whether a transaction is a short sale at the time of placing an order.
- Conversely, retail investors have the option to make a similar disclosure by the close of the trading day, as outlined by SEBI.
