Sebi to revamp short-selling, securities lending rules

The Securities and Exchange Board of India (Sebi) is reviewing the framework for short selling and securities lending and borrowing (SLB) to improve market liquidity and price discovery, chairman Tuhin Kanta Pandey said on Saturday.

Short selling allows investors to sell borrowed shares, while SLB provides the mechanism for lending and borrowing securities.

The review is part of the regulator’s broader effort to deepen the capital markets following demands from market participants, Pandey said at an event.

Sebi will also address the need for parallel clearing in tender offers, share buybacks and offers for sale, which adds to costs. “We are fixing this, to improve capital efficiency and lower compliance burden,” Pandey said.

Sebi is exploring graded compliance requirements for stockbrokers based on their scale, client exposure and reliance on technology. It is also revising rules for depository participants to simplify compliance and strengthen safeguards against fraud, he said.

The regulator plans to extend the automated give-up and take-up facility to custodial clients, including portfolio management services and alternative investment funds, in the cash segment. The move would ​prevent funds from remaining blocked while awaiting custodian confirmation. Sebi is in the process of implementing the modified closing auction session (CAS). It also plans to extend its Samuhik Prativedan Manch reporting platform to depositories, allowing a single submission to serve both exchanges and depositories. To boost secondary market trading in corporate bonds, whose outstanding value stands at around 61 lakh crore, Sebi is developing a market making framework.
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