Market and regulatory experts said that through the update, the regulator has reiterated its framework and added the ‘inadvertently missed points’.
In the fresh circular, it has reintroduced upfront disclosure by institutional investors at the time of placing short sale transactions. Further, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day.
These norms were already in place through a circular issued by the market regulator on December 20, 2007, on the broader framework for short-selling. However, in the master circular dated October 16, 2023, the remarks on upfront disclosures by institutional investors were missing.
A master circular is a compilation of all other existing circulars of the particular department.
Under the regulations, brokers are mandated to collect the details on scrip-wise short sell positions and upload it to the stock exchanges before the next day’s trading. The consolidated information is disseminated for public information on a weekly basis.
These provisions were already there through the 2007 circular.
Sebi’s regulation on short-selling came into focus during the Adani-Hindenburg investigations where the market regulator submitted to the Supreme Court that short-selling was regulated through the circular issued in 2007.
Sebi had submitted that “short selling is a desirable and essential feature to provide liquidity and to help price correction in overvalued stocks and hence, short selling is recognised as a legitimate investment activity by securities market regulators in most countries”.
The apex court had noted, “We record the statement made by the Solicitor General before this Court that measures to regulate short selling will be considered by the Government of India and Sebi.”
First Published: Jan 05 2024 | 8:42 PM IST