Short Selling & SLB to be effective from April 21

Short selling of stocks and Securities Lending and Borrowing mechanism kicks in on April 21 on BSE & NSE. All classes of investors would be allowed to short sell. Institutional investors will not be allowed to indulge in day trading. Moreover they will have to disclose upfront if their transaction is short sell or it’s a normal trade. Retail investors will have the option of disclosing their trades as short sell by the end of the day.

To begin with, the stock lending and borrowing mechanism will happen in 250 stocks which are a part of F&O list. The entire transaction would be completed on a T+1 basis and the lending or borrowing will be for a period of seven working days. So, if one borrows a stock today, the squaring up of that will take place after seven working days from the date of borrowing of the stock. SLB transaction session will take place between 10-11 am daily.

The margins and collaterals will be applied on an upfront basis. For some market participants, there are some position limits which have been placed at around 10% of the market-wide limit. Also, the market-wide limit for these stocks would be for 10% of free float. But for individual clients, the position will be 1% of the market-wide limit.

Scheme of Stock lending and borrowing will neither attract STT nor Capital gains as stock lending and borrowing does not lead to transfer of securities. However, short selling transactions and profit from such transactions will be subject to STT and Capital Gains Tax.