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SEBI to lift ban on short sales

The Securities and Exchange Board of India today decided to lift the ban on short selling of stocks in view of the climb in stock indices during the last few days. The capital market regulator will remove the ban, effective July 6.

The Inter Exchange Coordination Group and Inter Exchange Surveillance Group of the stock exchanges met in Bombay today to review the market conditions. The situation now indicated that the outstanding positions of short sales and long purchases had come down substantially. The group recommended early lifting the ban on short sales and introduction of appropriate safeguards in terms of additional margins.

The group also felt that the concentration margin, incremental carry-forward margin and special margins and ban on short selling had contributed to the stability of the market.

The group also considered the margin system to deal with market volatility. Among the many suggestions discussed were a possible margin system, including imposing additional margins on a graded scale for volatile scrips that will be defined in terms of percentage of upward or downward price movement.

A small group of representatives from the Bangalore, Bombay, Calcutta, Delhi, Ludhiana and National stock exchanges has been set up to make recommendations to SEBI before July 6, so that the additional margin system could be in place before the removal of restrictions on short sales.