In order to provide a mechanism for borrowing of securities to enable settlement of securities sold short, it has also been decided to put in place a full-fledged securities lending and borrowing (SLB) scheme for all market participants in the Indian securities market, said a Sebi circular here.

Accordingly, the market regulator has advised the stock exchanges and the depositories, to put necessary systems in place in this regard. It may be noted that hitherto, only retail investors were allowed to short sell but not institutional investors.

Eligibility

To begin with, securities traded in F&O segment shall be eligible for lending & borrowing under the scheme which shall be operated through clearing corporation or clearing house of stock exchanges having nationwide terminals who will be registered as Approved Intermediaries (AIs) under Securities Lending Scheme, 1997 (SLS, 1997).  
“The SLB shall take place on an automated, screen-based, order-matching platform, which will be provided by the AIs. This platform shall be independent of the other trading platforms,” it said. “All categories of investors including retail, institutional etc will be permitted to borrow and lend securities. They shall access the platform for lending/borrowing set up by the AIs through the clearing members,” the release said. The tenure of lending/borrowing shall be fixed as standardised contracts and to start with, contracts with tenure of seven trading days is likely to be introduced.

“The settlement cycle for SLB transactions shall be on T+1 basis. The settlement of lending and borrowing transactions shall be independent of normal market settlement,” the release said.
The dates of implementation will be announced later, the release added.