SEBI Working Group on Short Selling and SLB Review
Why in the news
The capital markets regulator plans a fresh look at the rules for short selling and share lending, aiming for more transparency, efficiency and depth in the market.
Key facts
- Body to be formed: a working group for a holistic assessment of both frameworks, including regulatory gaps and global best practice.
- Announced by SEBI Chairman Tuhin Kanta Pandey at the CNBC-TV18 Global Leadership Summit.
- Short selling framework: introduced in 2007.
- SLB mechanism: launched in 2008.
- Despite several adjustments, India’s SLB market lags global peers, which is why a structural review is planned.
About Securities Lending and Borrowing
SLB is a regulated arrangement where shares are lent or borrowed for a fixed period, typically to enable short selling, arbitrage or to avoid settlement failures. It runs on stock exchange platforms, and clearing corporations manage it.
| Participant | Role |
|---|---|
| Lender | Holder of shares in a demat account who lends them for a lending fee; gets the same quantity back later |
| Borrower | Trader who borrows for short selling, hedging or avoiding delivery failure, and returns the shares when the period ends |
| Stock exchange | Provides the trading platform |
| Clearing corporation | Guarantor (counter-guarantor) that ensures obligations are met and settlement is smooth |
Significance
- Lets investors earn passive income on idle shares.
- Improves market liquidity and efficiency.
Exam angle
- Full form: Securities Lending and Borrowing; launched 2008 by SEBI.
- Guarantor of settlement: clearing corporation.
- Lender earns a fee; borrower may use it for short selling.