SEBI Tightens Short Selling Rules: Institutional Investors Must Disclose Upfront

In a significant move aimed at curbing market volatility, the Securities and Exchange Board of India (Sebi) has mandated institutional investors to disclose upfront at the time of placing an order whether a proposed transaction is a short sale or not.

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Changes in Short Selling Norms

Sebi has made certain changes with respect to norms pertaining to short selling in the market. Short selling refers to selling a stock that the seller does not own at the time of trade. Both retail and institutional investors are permitted to short sell stocks.

Disclosure Requirements

Amending a circular relating to short selling issued last year, Sebi said that institutional investors shall disclose upfront at the time of placing an order whether the transaction is a short sale. However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.

Reporting by Brokers

The brokers shall be mandated to collect the details on scrip-wise short sell positions, collate the data, and upload it to the stock exchanges before the commencement of trading on the following trading day.

Dissemination of Information

The stock exchanges shall then consolidate such information and disseminate the same on their websites for the information of the public on a weekly basis, Sebi said in a circular on Friday.

Review of Disclosure Frequency

The circular, issued to stock exchanges, clearing corporations, and depositories, also said the frequency of such disclosures may be reviewed from time to time with the approval of Sebi.

Concerns about Short Selling

In recent times, there have been concerns about the practice of short selling and subsequent volatility in the securities market. Sebi's move to tighten the norms for short selling is seen as an effort to address these concerns and ensure market stability.