RBI extends short sale of G-Sec to 3 months

Short selling means selling securities which are not owned by the seller at the time of selling in order to buy it at lower prices later.

Mumbai: The Reserve Bank Wednesday said it has decided to extend the period of short sale of government bonds to a maximum period of 3 months from existing limit of 5 days.

Short selling means selling securities which are not owned by the seller at the time of selling in order to buy it at lower prices later.

It has been decided to extend the period of short sale from the existing 5 days to a maximum period of three months (including the day of trade), effective from February 1, 2012, RBI said in a notification.

Participants undertaking short selling should ensure that these transactions are in conformity with fair market practices and are conducted in a transparent manner, it said.

In this connection, it said, participants may review their systems and controls to ensure that the same are appropriate to prevent market abuse like use of insider
information, spreading of false or misleading information, distortion of the price-discovery mechanism, etc. for personal gains.

Further, participants shall also report to RBI any suspected cases of market abuse regardless of whether it was by their own employee, client or other market participant, it said.
 
Based on the recommendations of the Technical Group on the Central Government Securities Market, intra-day short selling in central government securities was permitted in February 2006.
 
Subsequently, based on the feedback received, the period of short sale was extended to five days in January 2007, it had said.

With a view to providing a fillip to the IRF (interest rate future) market and the term repo market, it is proposed to extend the period of short sale from the existing five days to a maximum period of three months, it had said.

PTI

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