Securities and Exchange Board of India eases short selling norms 

Doing away with certain requirements related to short selling, capital market regulator, the Securities and Exchange Board of India (Sebi) has eased norms for entities trading in the Securities Lending and Borrowing segment.

SLB mechanism, also referred to as short-selling, allows an investor to sell securities by borrowing them from a market intermediary after putting up a collateral.

Under the new rules, Clearing Members will not be required to enter into agreement with clients for trading in the SLB segment.

At present, rules require execution of a master agreement having two parts – the first between Authorised Intermediary ( AI) and Clearing Members, while the other has to be between CMs and clients.

“The Authorised Intermediaries shall enter into an agreement with Clearing Members for the purpose of facilitating lending and borrowing of securities”, Securities and Exchange Board of India said in a circular.

The modifications have been effected after taking into account suggestions made by the market participants, the watchdog said.

According to the regulator, the agreement would have to specify the rights, responsibilities and obligations of the parties to the agreement.

“The agreement shall include the basic conditions for lending and borrowing of securities as prescribed under SLB framework,” Sebi said.

“The Authorised Intermediaries AIs shall ensure that there shall not be any direct agreement between the lender and the borrower,” Sebi said.

“The rights and obligation document shall be mandatory and binding on the CMs and the clients for executing trade in the SLB framework,” it added.

Sebi has asked the stock exchanges and depositories to take necessary steps, and put in place systems for implementation of the new norms, among others.

 

Source: economictimes

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