SEBI may change short-selling rules.

• SEBI is considering a major overhaul of short-selling regulations, potentially allowing it for all stocks, excluding those in the trade-to-trade (T2T) segment.
• The proposal may also scrap short-sale disclosures and penalties currently imposed by stock exchanges.
• Short-selling allows investors to sell a stock without owning the stock at the time, a strategy used to bet on the fall in stock prices.
• Currently, naked short-selling is banned, with SEBI mandating investors to deliver securities at the time of settlement.
• Non-institutional investors continue to engage in short selling of non-F&O stocks due to their ability to sell a stock and square off their position within the same trading day.
• SEBI’s push for direct payout of securities could affect short-term trading strategies like buy-to-day-sell-tomorrow.
• Current rules require institutional investors to disclose upfront if a transaction is a short sale, while retail investors must report it by the end of the trading day.
• SEBI may remove the exchange’s enforcement role once direct payout of securities is implemented.