INDIA: SEBI amends securities borrowing and lending rules for India short selling

Wednesday June 4 2014

The Securities and Exchange Board of India has published revisions to the securities borrowing and lending framework for India short selling.

With regard to the requirement of an agreement between Clearing Member and client for the purpose of lending and borrowing of securities, SEBI has decided to modify Paragraph 6 of Annexure 2 of the SLB circular (Circular 14/2007) as follows:

“3.1. The Authorised Intermediary (AIs) shall enter into an agreement with Clearing Members (CMs) for the purpose of facilitating lending and borrowing of securities.

3.2. The agreement shall specify the rights, responsibilities and obligations of the parties to the agreement. The agreement shall include the basic conditions for lending and borrowing of securities as prescribed under SLB framework. Further, the exact role of AIs/CMs vis-à-vis the clients shall be laid down in the agreement. AIs shall ensure that there shall not be any direct agreement between the lender and the borrower.

3.3. In addition to that, AIs may also include suitable conditions in the agreement to have proper execution, risk management and settlement of lending and borrowing transactions with clearing member and client.

3.4. The AIs shall frame a rights and obligations document laying down the rights and obligation of CMs and clients for the purpose of lending and borrowing of securities. The rights and obligation document shall be mandatory and binding on the CMs and the clients for executing trade in the SLB framework.”

Click on the above link for the revisions.