Sebi Scraps Nse Sops On Short Sales

The Securities and Exchange Board of India has decided to withdraw the automated lending and borrowing module benefits for short-sellers on the National Stock Exchange. This follows the board's earlier decision to ban naked short-sellers on the Bombay Stock Exchange from receiving badla charges.

Earlier, the BSE asked Sebi to look into the working of the ALBM which, the BSE pointed out, was similar to the its badla mechanism. It also said its members were at a disadvantage as they could not receive badla charges for short sales.

On the basis of a decision taken by the investigations, enforcement and surveillance department on May 17, Sebi had directed that short-sellers who either do not have their own shares or have not borrowed shares will not receive the carry-forward charges for settlements ending after May 31. The difference will be credited to the Investor Protection Fund of the stock exchange.

 

Sebi yesterday clarified that in the ALBM segment, "Short-sellers receive charges when the lending price is below the clearing price. Hence, it has been decided that such charges shall be released to the short-seller only if either the seller actually owns the shares (and is using the ALBM only for operational convenience or other reasons) or the seller actually has funds by which he could have taken delivery of the borrowed shares even in the ALBM transactions and trade transactions were not netted off."

Sebi further stated: "In other cases, the excess of the clearing price over the lending price would be credited to the Investor Protection Fund of the exchange and shall not be released to the short sellers and this would be applicable for settlements ending after May 31."

BSE had also highlighted that according to Sebi regulations, a BSE broker was allowed to carry forward positions worth Rs 20 crore and per scrip positions of only Rs 4 crore. However, the same is not applicable on the NSE.

Sebi also emphasised that other matters relating to ALBM were being further examined by the group under the chairmanship of J R Varma, full-time member of the Sebi Board.