Sebi Imposes Ban On Short Sales

The Securities and Exchange Board of India has further tightened the screws on market players with fresh measures being announced which effectively ban short sales on the Indian capital markets for a temporary period.

With effect from today, net outstanding sales positions at the end of any trading day in each security will have to necessarily result in delivery.

However, in respect of carryforward trades, all outstanding short sales positions at the end of trading on June 16, will have to be squared up in the following manner:

At least 50 per cent in the current settlement and the balance in the succeeding settlement.

Brokers at the Bombay Stock Exchange said that this would help in reducing the slide at the markets and thus creating the bottom for the markets. This measure will not apply to those securities which are in `no delivery'. However net sales transactions in these `no delivery' securities will attract a daily margin of 50 per cent of the net outstanding position in the settlement in which the securities are in no delivery. All outstanding net sales position at the end of the no-delivery period must result in delivery.

The squaring up of net outstanding purchase positions is permitted.``This may not have a necessary impact in those scrips where the FII holding is strong. There will be no upturn but it will reduce the risk which the markets have faced in recent days,'' a broker at one of the oldest trading firms at the BSE said.

Till late evening the market continued to be nervous over the payment crisis previaling at the BSE and what was the exact position of brokers who had taken speculative positions and were struggling to pay up the differences.

"The present market conditions results from various factor including the deteriorating scenario in South East Asia, selling by FIIs, uncertain domestic market conditions. It is a situation which called for emergent measures that we have taken to stabilise the market. We will be keeping a close watch on the situation and the measures can be rolled back very shortly once the market has stabilised", Pratip Kar, executive director, Sebi. Says a source ,``No one will enter short at this stage...for even those who sold short on Friday last will have to square up when the markets are 200 points lower than previous levels...but it will aid in stopping the slide for a large number of scrips.''