Short Selling

The capital markets regulator, the Securities and Exchange Board of India (Sebi), recently issued a new circular which said that while placing orders, institutional investors will have to inform in advance whether the transaction is short selling or not. The order also said that retail investors would be allowed to make similar disclosures till the end of trading hours on the day of the transaction.

- Tarun Bhardwaj

Sebi has allowed short selling by all categories of investors, including retail and institutional, but has also imposed certain conditions to prevent market manipulation. Let's understand more about it.

WHAT IS SHORT SELLING?

■ It is also known as 'shotting'. Under this strategy, traders first sell the shares to buyers at a higher price and then buy them back at a lower price at a later date or time.

■ The price difference between these is the trader's profit or loss.

■ Sebi defines short selling as a process in which traders sell shares even when they do not own them.