SEBI tightens short selling rules

Institutional investors will have to disclose upfront at the time of placement of an order whether the transaction is a short sale, according to a new circular issued by markets regulator SEBI on Friday.

However, retail investors would be permitted to make a similar disclosure by the end of the trading hours on the transaction day, the order said.

“The brokers shall be mandated to collect the details on scrip-wise short sell positions, collate the data and upload it to the stock exchanges before the commencement of trading on the following trading day. The stock exchanges shall then consolidate such information and disseminate the same on their websites for the information of the public every week. The frequency of such disclosure may be reviewed from time to time with the approval of SEB,” it added.

While SEBI has allowed all classes of investors like retail and institutional investors to short sell, it has imposed certain conditions to curb foul play.

The decision comes close on the heels of the Supreme Court’s judgement on petitions seeking a court-monitored investigation into alleged manipulation in Adani Group stocks, following the Hindenburg report.

The top court rejected the plea but asked SEBI to investigate whether Indian investors suffered losses from the research agency’s actions or if there were short-positions taken in the market that went against the law.

SEBI had earlier issued a Master Circular for Stock Exchanges and Clearing Corporations in October 2023, which has now been updated with the incorporation the new provisions in the latest circular.