No change in regulatory framework for short-selling: SEBI

Capital market regulator SEBI said on Sunday that there was no change in its short-selling framework. Its short-selling framework enables investors to short-sell -- or borrow shares of a stock to sells them at the current high price and then buy them back later at a lower price to return to the lender -- under certain conditions.

Dismissing media reports suggesting that certain changes were brought about in the framework and set to take effect from Monday, December 22, SEBI noted: "The question of any change in this framework from tomorrow (Monday), as reported incorrectly by the media story, therefore, does not arise."

SEBI introduced stricter disclosure norms and restrictions under its short-selling framework in January last year, in a bid to aim to bring more transparency and control to the process.

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The regulator keeps tabs on market news actively and issues timely notifications to flag any misinformation in order to protect the interests of investors on Dalal Street.

What is SEBI's short-selling framework? What does it do?

The regulator's short-selling framework defines short selling -- or selling borrowed shares for profit.

This framework enables different investors -- including retail and institutional -- to engage in short-selling, while strictly prohibiting naked -- or unhedged -- short-selling.

Investors must borrow shares before selling in order to ensure delivery. Hence, no selling of borrowed shares is allowed without a prior agreement.

What is short-selling? How does it work?

Short-selling refers to a market mechanism where an investor sells a stock they don't own at the time of trade in anticipation of a fall in its price.

What does the framework do?

It regulates risk (by ensuring that obligations are met), enhances transparency, supports liquidity and promotes fair trading for all investors.

When was the short-selling framwork introduced?

SEBI first introduced the short-selling framework in 2007, allowing it under specific conditions, and rolled out the the Securities Lending and Borrowing (SLB) mechanism the next year to enable short-selling by allowing investors to borrow shares.