Liquid Index ETFs shall be eligible for trading in the SLB segment: SEBI

November 29, 2012

As part of changes in the securities lending and borrowing framework, SEBI has permitted ETFs (Exchange Traded Funds) that track indices to trade in the short selling market. Liquid Index ETFs shall be eligible for trading in the Securities Lending and Borrowing (SLB) segment.

SEBI has also said that an Index ETF would be considered ‘liquid’, if:

The Index ETF has traded on at least 80% of the days over the past 6 months.
Index ETF’s impact cost over the past 6 months is less than or equal to 1%.

SEBI has also introduced roll-over facility for lenders and borrowers in the SLB segment

This concerns with the short selling in the market. In general, short selling pertains to selling of a stock that is not owned by the seller at the trading time. The short selling can be done by retail and institutional investors.

As per SEBI, any lender or borrower who wants to extend an existing lent or borrow position shall be permitted to roll-over such positions. Thus, now a lender who is due to receive securities in the pay out of an SLB session can extend the period of lending. Likewise, a borrower can extend the period of borrowing.

The roll-over shall be conducted as part of the SLB session.
Rollover would not be permitted for netting of counter positions.
Rollover shall be available for a period of three months i.e. the original contract plus two rollover contracts.

Sebi has asked stock exchanges to take necessary steps for implementing the circular.

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