The Stock selling, lending, and borrowing mechanism kicks in on April 21 on both exchanges. All classes of investors would be allowed to short sell. Institutions will not be allowed to indulge in day trading, but they will have to come out and say whether they want to short sell or it’s a normal trade. Retail investors will have the option of disclosing their trades as short sell by the end of the day.
The entire stock lending and borrowing mechanism will be based on stocks, which are part of the F&O list, or around 250 stocks. To begin with, the stock lending and borrowing mechanism will happen in 250 stocks. The entire transaction would be completed on a T+1 basis and the lending or borrowing will be for a period of seven working days. So, if one borrows a stock today, the squaring up of that will happen after seven working days from the date of borrowing of the stock.
The margins and collaterals will be applied on an upfront basis. For some market participants, there are some position limits which have been placed at around 10% of the market-wide limit. Also, the market-wide limit for these stocks would be for 10% of free float.
But for individual clients, the position will be 1% of the market-wide limit. That’s the maximum, which a client can take there. On a taxation issue, there will not be any Security Transaction Tax, or STT, which will be charged for Securities Lending and Borrowing, or SLB. But on short selling, STT will be levied and will attract capital gains there.
On the whole, it would be April 21 is a day when we will have short selling and stock Securities Lending and Borrowing.
Source: Moneycontrol.com
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