SEBI plans major short-selling reforms, may double stock lending universe and ease collateral norms: Report

The Securities and Exchange Board of India (SEBI) is considering significant reforms to strengthen India’s securities lending and borrowing market, according to a Reuters report. The proposed changes are aimed at improving market liquidity, making short selling easier, and deepening the country’s derivatives market.

As part of the proposed reforms, SEBI may nearly double the number of stocks eligible under the Securities Lending and Borrowing (SLB) mechanism. Expanding the universe of eligible securities is expected to provide investors with greater opportunities to borrow and lend shares, supporting more efficient price discovery in the market.

The market regulator is also evaluating a reduction in collateral requirements for borrowing shares. Lower collateral norms could reduce the cost of participating in the SLB market, making it more accessible for institutional and other eligible investors.

According to Reuters, the proposals are designed to encourage greater participation in India’s securities lending ecosystem and facilitate short selling by increasing the availability of lendable stocks. The reforms could also enhance liquidity in the cash and derivatives segments by improving access to borrowed securities.

If implemented, the proposed measures would mark one of the most significant changes to India’s securities lending framework in recent years, reflecting SEBI’s broader efforts to strengthen market efficiency and expand the depth of the country’s capital markets.

The proposals are currently under consideration, and SEBI has not yet announced a timeline for their implementation.