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SEBI to raise circuit-filter limit to 12%

The Securities and Exchange Board of India or SEBI has decided to expand the circuit-filter limit from the present eight per cent to 12 per cent from May 2.

The decision is based on the recommendation of SEBI's Risk Management Group.

About 200 shares, comprising all A-group scrips and some in the B1-group, would be brought under the new circuit-filter system. The full list would be announced on April 27.

Under the new system, a half-hour cooling period will be imposed after a scrip hits the eight per cent circuit-filter. Trading will resume after the break. But it will be halted if the scrip hits the12 per cent filter on the same day. The system applies to even stocks under the rolling settlement.

According to SEBI chairman D R Mehta, the measure was meant to offer a way out to small investors, especially when a scrip hits the bottom of the filter. Easing of controls was also considered keeping in mind the enhanced maturity levels of the capital market.

SEBI has made it compulsory for short-sellers to borrow shares and settle badla (carry forward) positions to get badla charges. Else, they would not be entitled for badla charges that were due to them in the past in the form of price differential.

The plan would come into force from the settlement period beginning after May 31 on the respective stock exchanges.

Earlier, short-sellers used to get badla charges out of the transaction either from the long forward buyer or financier as the case may be, irrespective of whether he delivers the scrips or not.

The move is expected to make the short-sellers, who currently execute deals without costs whether they deliver the shares or not, to pay for their transactions. SEBI, it is learnt, recognises the "positive role" played by short-sellers in the market.

SEBI's RMC did not deliberate the issue of imposition of margins on foreign institutional investors.

SEBI has ruled out total relaxation of circuit-filters in the near future saying they are important to check volatility, especially when it is due to speculative activities.

Business