SEBI Circular on Short Selling,Impact on Market

By | March 23, 2020 12:35 am
SEBI has taken proactive risk-containment measures in view of the ongoing market volatility. Check this circular.
Sebi has stepped in to ease volatility by clamping curbs on short positions in the F&O segment, increasing margins in non-F&O stocks in the cash market and revising the marketwide position limits.
Below will be the Impact

Revision of marketwide position limits

A market-wide position limit is the maximum outstanding position allowed across all stock derivative contracts. At the end of a session, stock exchanges disseminate data on aggregate open interest in stock derivatives. If the aggregate open interest for any scrip exceeds 95 per cent of the marketwide position limit (MWPL), clients are required to cut positions through offsetting. Trading in a scrip resumes only after the aggregate open interest across exchanges comes down to 80 per cent or below the MWPL. Sebi has decided to revise MWPL from 95 per cent to 50 per cent of existing levels in a phased manner. The new restriction will also be applicable to those stocks which hit the market limit of 40 or more in last five days. NCC, Jindal Steel & Power, Indiabulls Housing, Canara Bank, Adani Enterprises, Canara Bank, PNB, SAIL, PVR Vodafone Idea, Just Dial and YES Bank would be among a dozen stocks that could probably go into a ban period

Higher Equity Margins for  F&O Stocks

If the average daily price range, for a stock is more than 15% in the last 5 trading days or if the F&O contracts of these stocks have Market-Wide Position Limit (MWPL or Maximum open interest allowed in the contract) of more than than 40% in the last 5 days, then the minimum margin required to buy such stocks will be 40%.

Index short selling

Big entities such as foreign investors, mutual funds and proprietary desks now cannot hold short positions in index derivatives exceeding Rs 500 crore or 7.5 K NF Lots, if they do not own the underlying shares.

What this mean is that short positions created by these entities in index derivatives via short futures, short Calls or long Puts cannot exceed their holding in stocks in notional value terms. This means shorts can be created on the Nifty or the Bank Nifty for hedging purposes only. Besides, any long trade exceeding Rs 500 crore would require cash deposit or liquid instruments like government bonds or treasury bills. So, for instance, if the notional value of the trade is Rs 900 crore, the trader will have to cough up Rs 400 crore in cash.

Basically it will not have any impact on traders trading with a capital upto  50 cores. Just aviod trading in the 12 F&O Stocks which can come under BAN .
Category: Daily

About Bramesh

Bramesh Bhandari has been actively trading the Indian Stock Markets since over 15+ Years. His primary strategies are his interpretations and applications of Gann And Astro Methodologies developed over the past decade.

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