Team siliconindia

• SEBI starts consultations to simplify securities lending and borrowing (SLB)
• Aims to increase liquidity in India’s underperforming cash market
• Seeks to reduce reliance on derivatives for short selling

The Securities and Exchange Board of India (SEBI) has begun talks with market participants to simplify the Securities Lending and Borrowing (SLB) process. The goal is to boost participation, improve liquidity in the cash market, and reduce the gap between cash and derivatives markets.

SEBI’s move comes as India’s cash markets continue to lag behind the highly active derivatives segment. On expiry days, index options trading volume is around 350 times more than cash market turnover.

Ananth Narayan, Whole Time Member at SEBI, said, "We want to encourage more short selling through SLB rather than futures". He stressed the need to make SLB more attractive and efficient for all participants.

Currently, SLB in India operates through exchanges with several intermediaries involved, which market players say slows down the process and adds complexity. In contrast, many global markets handle such transactions over-the-counter (OTC), making them faster and more flexible.

Volumes in India’s SLB market remain shallow, and the number of eligible stocks is limited. This restricts the ability to execute large trades without affecting stock prices, making it unattractive for institutional investors.

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SEBI is now seeking input from brokers, institutional investors, and other stakeholders to explore ways to streamline the process, expand the list of tradable stocks, and remove operational hurdles.

If successful, this move could make short selling easier, improve price discovery, and make India’s stock market more balanced and vibrant.