The Securities and Exchange Board of India (SEBI), India’s securities regulator, is reviewing short-selling and securities lending and borrowing (SLB) rules to improve liquidity and price discovery, SEBI Chairman Tuhin Kanta Pandey said.
Pandey made the remarks at an Association of NSE Members of India convention in Mumbai on Oct. 24, where he discussed the review alongside other proposed market reforms.
In a June address, Pandey described a comprehensive review of the short-selling and securities-lending frameworks. He said the work was intended to strengthen links between cash-market trading and derivatives activity, while supporting liquidity.
A short sale involves selling securities an investor does not own at the time of the trade. The lending mechanism can provide securities for delivery when a trade settles.
SEBI’s framework traces to a Dec. 20, 2007, circular that allowed all classes of investors to short sell and established securities lending and borrowing to support delivery. The framework prohibits naked short selling and requires delivery. SEBI said it became operational on April 21, 2008.
Pandey also outlined a corporate-bond market-making framework intended to encourage trading in the secondary market. SEBI is considering broker compliance requirements that would account for firms’ size, client exposure and reliance on technology.
His Oct. 24 address separately covered planned changes to clearing arrangements for tender offers, buybacks and offers for sale. Pandey announced no draft provisions or timetable for the short-selling and SLB review.
