Secondary Market Transactions in Government Securities – Short Selling

Presently short sale is not allowed between CSGL account holder (custodian) and its gilt account holder (GAH). It has now been decided as under:

i.                    A custodian may undertake a short sale transaction with its GAH within the permissible short sale limits

ii.                  A custodian may put through a cover transaction with a GAH to square a short sale transaction in the related security undertaken with a market participant other than its GAH/s.

The custodians will have to tag the deal as short sale or cover while reporting the same to NDS-OM. This will be reckoned in the computation of the short sale limit utilization.

At the time of settlement at RBI, custodians will have to ensure adequate balance in their SGL failing which it will be treated as a SGL bounce with consequent penalties.

Banks and PDs have to put in place appropriate systems and internal controls and submit a duly certified report of the daily security-wise short sale position, to RBI on a monthly basis. 

Based on RBI Circular dt 29/10/15. Please visit www.rbi.org.in for any further clarification if required…..Poppy