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Leading bourse NSE has allowed seven exchange traded funds (ETFs), including Goldman Sachs Banking ETF and Kotak Nifty ETF, to trade in the Securities Lending and Borrowing (SLB) segment from tomorrow.
The move comes after capital markets regulator Securities and Exchange Board of India (Sebi), last year, announced that 'liquid' index, ETFs --track indices to trade in the short selling market-- would be eligible for trading in the SLB segment.
Among other ETFs that would be available for trading in SLB segment includes IIFL Nifty ETF, Nifty Goldman Sachs ETF, Nifty JR Goldman Sach ETF, Most Shares M50 ETF and Most Shares N100 ETF.
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"These Index ETFs shall be made available for trading in the SLB scheme with effect from September 3, 2013," National Stock Exchange (NSE) said in a circular dated August 30.
With the introduction of these ETFs in the SLB segment, there would be wider participation as well as increased volumes. It would also facilitate short-selling in the ETF segment.
Under the SLB mechanism, investors can lend their idle shares to borrowers through the clearing corporation of a stock exchange to earn interest. The borrowers, on the other hand, can trade in such securities.
Generally, short selling refers to selling of a stock that is not owned by the seller at the trading time.
According to Sebi, index ETF would be considered 'liquid', if it has traded on at least 80 per cent of the days over the past six months. Another criteria is that the particular Liquid Index ETF's impact cost over the past six months is less than or equal to one per cent.
