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SEBI Regulation of Short Selling

SEBI Regulation of Short Selling mind map
Recent News
Supreme Court Oversight
Central Government and SEBI
Post Adani Group Allegations
January 4, 2024
What
Definition
Selling Unowned Stock
Profit from Price Fall
Historical Prohibitions
2001-2008 Ban
2020 Temporary Ban
Current SEBI Guidelines
Permits All Investor Classes
Prohibits Naked Short Selling
Institutional Day Trading Banned
SLB Scheme Implementation
Stocks in F&O Eligible
Disclosure Requirements
Why
Market Stability Concerns
Prevent Manipulation
Economic Impact
Who
SEBI
Market Regulator
Institutional Investors
Subject to Restrictions
Retail Investors
Permitted with Disclosures
How
Securities Lending
Borrowing Scheme
Delivery Obligations
Deterrent Provisions
Pros/Significance
Enhances Market Efficiency
Safeguards Investor Interests
Transparent Trading Environment
Cons and/or Challenges
Potential for Market Falls
Risks of Manipulation
Delivery Failures

The Indian Government, through the Securities and Exchange Board of India (SEBI), has implemented a comprehensive framework to regulate short selling in the securities market. Short selling involves selling a stock that the seller doesn’t own at the time of the trade, aiming to profit from a price drop. SEBI’s recent guidelines permit all classes of investors to engage in short selling, strictly prohibiting naked short selling. Institutional investors face restrictions like the ban on day trading and are required to declare their short sales. The Securities Lending and Borrowing (SLB) scheme supports this practice. These measures aim to enhance market efficiency, protect investor interests, and maintain a transparent and secure trading environment.

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