Market regulator SEBI has made a slight change in the rules of short selling. SEBI has made it mandatory for institutional investors to indicate whether the transaction is a short sale or not while placing an order for a deal.
Attempt to stop market turmoil
This step of SEBI has been taken in the direction of preventing market volatility. Short selling means that a seller sells those shares which he does not hold at the time of the trade. Currently, according to SEBI rules, both retail and institutional investors are allowed to short sell shares.
What is new in SEBI’s circular?
Now the question arises that what is new in SEBI’s circular? What is it that will make a difference to anyone? So the only new thing is that
- If the transaction is being done on behalf of an institutional investor, then at the time of placing the order he will have to inform whether it is a short sale or not.
- If the transaction is being done on behalf of a retail investor, he will have to give a disclosure at the end of the business day whether it is a short sale or not.
What will brokers, stock exchanges have to do?
According to the circular issued by SEBI on Friday, ‘Brokers will be mandated to collect data on share-wise short sale positions, collate them and upload them on the stock exchanges before the commencement of trading in the next trading session. After this, the stock exchanges will post this data on their websites on a weekly basis for the information of the people.
The circular issued to stock exchanges, clearing corporations and depositories also states that the frequency of such disclosures may be reviewed from time to time with the approval of SEBI.
