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Sebi to lift ban on short sales from July 2

The Securities and Exchange Board of India risk management group has decided to lift ban on short sales from July 2.

Sebi will also lift the ban on stock lending from July 2, 2001, coinciding with the introduction of rolling settlement across the exchanges in the country.

Talking to reporters after the Sebi group's meeting in Bombay, Sebi board member J R Varma said that the group has also decided to make mandatory the unique client ID for the investors buying shares valued above Rs 100,000.

Investors would be required to provide their permanent account number for giving them unique identity across brokers and exchanges for deals exceeding Rs 100,000, Verma said.

Further, in a move towards eliminating benami transactions and circular trading, the group decided to introduce a unique ID code for investors across all stock exchanges in the country from August 1. This will be applicable for clients having order value of Rs 100,000 or more.

It has also made mandatory for brokers to collect the permanent account number allotted by the income tax department for all their clients as well as the clients of their sub-brokers.

Brokers are also required to maintain these details in their back office and pass it on to stock exchanges periodically. This could mean that the exchanges could be able to easily identify trades done by any investor across exchanges.

This would help the regulator in curbing manipulation of stock prices through circular trading and shifting of positions to avoid margins.

"From the beginning it was clear that the ban was a temporary measure and the introduction of rolling settlements on July 2 was thought to be an appropriate date for lifting the ban," said Varma.

He said Sebi has also decided to allow all kinds of stock lending from July 2, reversing its March 15 decision to disallow stock lending other than under the NSE's automated lending and borrowing mechanism - ALBM -- and the BSE's Borrowing and Lending of Securities System --BLESS.

The group decided that if a client does not have PAN number, he is required to give a declaration to that effect.

In such an event, until the PAN number is allotted such client shall furnish his passport number, the place and date of issue. If the client does not have a PAN number or a passport, he should furnish his driving licence number, place and date of issue.

If none of the above are available, the client shall give his voter ID number.

Brokers are also required to furnish the details of their clients to the stock exchanges/clearing corporations at specified intervals.

"Keeping in view the introduction of rolling settlement in July, the ban on the sale not backed by purchase order for the same scrip will be lifted on July 2," Verma said.

The stock-based lending would also be permitted from July 2, he said, adding that restrictions were not necessary when the rolling settlement was made operational.

Markets are showing signs of stabilisation and steps were taken for the benefit of the market, Sebi chairman D R Mehta said.

Making client ID compulsory for the investors would be applicable from August 1, 2001, he added.

Sebi had banned short sales on March 7 after sharp volatility in share prices.

Client identification would also aid risk monitoring and help track top 10 positions of the investors, he added.

Business Standard, UNI, PTI

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