10 months ago
SEBI to Review Short Selling and SLB Frameworks
Imagine you can borrow something you don't own, like a stock, to sell it, hoping to buy it back later at a lower price.
This is called short selling.
Also, you can lend out stocks you own to others for a fee, which is called Securities Lending and Borrowing (SLB).
India's stock market regulator, SEBI, is going to create a special team to look closely at the rules for both of these.
The rules for short selling haven't changed much since 2007, and the SLB system isn't as developed as in other countries.
SEBI wants to make sure these systems work well and are safe for everyone.
SEBI's chairman also mentioned that foreign investors still have a lot of faith in India's economy, even if they sometimes move their money around.
He explained that there are many new investments happening in India, which helps balance things out.
SEBI will form a working group to conduct a comprehensive review of short selling and Securities Lending and Borrowing (SLB) frameworks.
The current short selling framework was introduced in 2007 and has seen minimal changes.
The SLB mechanism, introduced in 2008, is considered underdeveloped compared to international standards.
SEBI Chairman Tuhin Kanta Pandey stated that foreign portfolio investors (FPIs) have strong confidence in India's growth story.
Pandey also indicated that reviews of stockbroker, mutual fund, LODR, and settlement regulations are in progress.
- Who
- SEBI Chairman Tuhin Kanta Pandey
- What
- Announced the formation of a working group to comprehensively review the short selling and Securities Lending and Borrowing (SLB) frameworks, and discussed FPI confidence in India.
- Where
- CNBC-TV18 Global Leadership Summit
- When
- Friday
- Why
- To address the need for reassessment of existing frameworks that have remained largely unchanged or are underdeveloped compared to global markets, and to reassure about India's economic strength.
Concerns Regarding Short Selling and SLB Frameworks
SEBI's Approach to Short Selling and SLB
Current Framework Status
Concerns Regarding Short Selling and SLB Frameworks
The short selling framework, introduced in 2007, has remained largely unchanged. The SLB mechanism, rolled out in 2008, is considered underdeveloped compared to global markets.
SEBI's Approach to Short Selling and SLB
SEBI acknowledges the need for a comprehensive review of both the short selling and SLB frameworks to ensure they are robust and efficient.
Purpose of Short Selling and SLB
Concerns Regarding Short Selling and SLB Frameworks
Short selling can be used to hedge positions or speculate on price declines. Borrowed securities in SLB are typically used for short-selling or to prevent settlement failures.
SEBI's Approach to Short Selling and SLB
The SLB framework aims to provide lenders an opportunity to earn additional income on idle shares, thereby improving market liquidity and efficiency.
Key facts
- Regulator
- Securities and Exchange Board of India (SEBI)
- SEBI Chairman
- Tuhin Kanta Pandey
- Event
- CNBC-TV18 Global Leadership Summit
- Key Action
- Establish a working group to review short selling and Securities Lending and Borrowing (SLB) frameworks.
- Short Selling Framework Introduced
- 2007
- SLB Mechanism Rolled Out
- 2008
- Other Reviews Underway
- Stockbroker and mutual fund regulations, Listing Obligations and Disclosure Requirements (LODR) 2015, settlement regulations.
- FPI Confidence in India
- Strong, with primary market investments offsetting secondary market movements.
Timeline
Retail investors lost money trading risky derivatives.
Leverage amplified their losses; finfluencers may have played a role.
Brokers and fund managers voiced concerns, urging regulatory action.
SEBI responded by adjusting IPO rules and increasing anchor investor quotas.
New systems will track pledged shares and simplify IPO disclosures.
Quotes
Tuhin Kanta Pandey
Chairman of Sebi
“We will soon take up a similar in-depth review of the Listing Obligations and Disclosure Requirements (LODR) 2015 and settlement regulations”
rediff.com
“I think I've said enough on this subject. The certainty right now is that the system is on and it is working”
rediff.com
Sources
Sebi Plans Faster, Smoother IPO Listing Process; To Simplify Offer Documents
'SEBI Will Soon Set Up Working Group To Undertake Review Of Short Selling & Securities Lending & Borrowing': Chairman Tuhin Pandey
SEBI will not intervene on valuation concerns: Pandey
‘Market Must Decide What’s Fair’: SEBI Chief Bats For Investor-Driven Valuations, Calls For Authentic ESG & Stronger Board Ethics
SEBI to set-up working group for comprehensive review of short selling and SLB frameworks: Tuhin Kanta Pandey
What SEBI chief Tuhin Kanta Pandey said on IPO overvaluations
Sebi plans automated streamlining of IPO-bound firms' pledged shares
Lenskart IPO: ‘Overpriced’ or ‘Long-Term Buy’? 7 Market Gurus weigh in
Governance must go beyond structure to substance: Tuhin Kanta Pandey
Sebi says IPO valuation not a gap, but ‘guardrails’ needed to protect small investors - Telegraph India
