Sebi Plans Working Group to Revamp Short-Selling and Securities Lending Norms

Sebi is set to form a working group to review and overhaul short-selling norms and the securities lending and borrowing mechanism (SLBM), aiming to deepen the cash equities market and enhance capital formation. Sebi Chairman Tuhin Kanta Pandey highlighted that a robust SLBM is key to improving price discovery and linking the cash and derivatives segments, while allowing investors to earn fees on idle securities or borrow shares for strategies like short selling and arbitrage.

In parallel, Sebi is consulting with the RBI to introduce bond derivatives for retail investors, with the goal of boosting the corporate bond market, which currently stands at Rs 54 trillion compared to Rs 91 trillion in bank credit. Pandey emphasized the need to make debt instruments more attractive for retail participation and to diversify funding sources through equities, bonds, and alternative investments.

Sebi also plans several investor-focused initiatives, including rationalizing IPO offer document summaries, ensuring automatic enforcement of lock-in requirements for pledged pre-IPO shares, and allowing debt issuers to provide incentives to certain investors. A nationwide investor education campaign is also in the works to raise awareness about corporate bonds and related investment opportunities.

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