Short Selling: SEBI loosens up further!
June 26th, 2007 - by 2point6billion.com
One of the important proposals in the 2007 Indian Union Budget was to allow the institutional investors to short sell their securities. Earlier this was possible only by retail investors due to regulatory restrictions. Securities and Exchange Board of India (SEBI) last week has announced that its soon going to implement short selling norms for the institutional investors as well. These rules would apply to both foreign and domestic institutions but only in derivative products to start with.
Increased short selling activity would make the stock market more liquid and increase its efficiency considerably. Once the proposed short selling norms for the prohibited investor class becomes effective, there will be a level playing field in the market. Its quite surprising in this sense that only derivative products are going to be covered in the proposal. There’s one more consideration here as to whether SEBI will stick to these norms or will it withhold them at later period of time against the interest of investors is yet to be seen.
China picture: The old laws passed in 1998 had specific restrictions on the short-selling mechanisms due to fears of rampant speculation, which were removed in 2006. It was only with establishment of China Financial Futures Exchange (CFFEX) in Shanghai in 2006, the mainland’s first exchange specializing in derivatives trading, which entailed a mechanism for short selling stocks, that this much needed concept took hold and allowed investors to benefit from both rising and falling markets.
Email This Post
Print This Post
