Relaxation in Short Selling Norms

SEBI has introduced changes to the securities lending and borrowing (SLB) framework which may help uplift the market for short sales. The contract tenure for SLB has now been increased to 12 months. The Economic Times notes the rationale:

SLB was introduced in April 2008, starting with a contract tenure of seven days. With hardly any interest from market participants in the product, the regulator increased the tenure to 30 days in November that year. But even that has not helped in attracting investors to the SLB window.

But, whether this set of reforms will achieve the intended results is not clear. It has been observed that other obstacles continue to exist in this market: stringent margin norms, and a restriction that confines borrowing and lending to the stock exchanges.

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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