SEBI is considering revamping short-selling norms to expand access, remove disclosure requirements, and address settlement challenges.
Relevance : GS 3(Economy )
Broader Short-Selling Access: SEBI is considering allowing short selling for all stocks, except those in the trade-to-trade (T2T) segment.
Removal of Disclosure & Penalty Norms: The regulator may scrap the requirement for upfront short-sale disclosures and penalties imposed by exchanges.
Current Short-Selling Regulations:
- Investors can sell stocks without owning them but must settle the transaction.
- Only stocks in the Futures & Options (F&O) segment are allowed for short selling.
Observations by SEBI:
- Non-institutional investors are already engaging in short selling for non-F&O stocks by squaring off positions within the same day.
Impact of Direct Payout of Securities:
- Strategies like buy-today-sell-tomorrow (BTST) may be affected.
- Stocks purchased in earlier settlements but awaiting delivery may not be counted as short sales.
Expected Regulatory Changes:
- Removal of weekly scrip-wise short-sale disclosure requirement.
- Elimination of penalties for settlement failures at the exchange level, reducing double charges.
Rationale Behind the Move:
- Advancements in clearing and settlement infrastructure (like the Securities Lending and Borrowing Mechanism) make disclosure norms redundant.
- Ensuring a level playing field for brokers by removing the need for real-time access to clients’ demat accounts.
Next Steps: A consultation paper on the proposed changes is expected soon.
