Capital markets regulator Securities & Exchange Board of India, or Sebi, has increased the tenure for lending and borrowing of stocks from seven days to 30.
The move comes at a time of heavy short selling in the Indian markets, led by entities who borrow stocks from foreign institutional investors, or FIIs. Stocks worth over $1 billion have been shorted in the Indian markets through this route so far.
Under the stock lending and borrowing scheme (SLBS), which started in April this year, securities could so far be borrowed only for seven days, after which the borrower had to return securities of the same type and class.
The extension of the tenure of the scheme will mean that shares can be returned on the last day of the month, which could coincide with expiry in the futures and options segment. The time for the SLB session has been extended from one hour (10 am to 11 am) to the normal stock trading hours of 9.55 am to 3.30 pm.
Sebi said the longer SLB tenure of 30 days will result in the need for appropriate adjustments for corporate actions like dividends, stock splits, bonus, merger, amalgamation and open offers. Accordingly, the dividend amount would be worked out and recovered from the borrower at the time of the reverse leg (in 30 days) and passed on to the lender.
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