The SEBI circular was released to correct missing clauses from Annexure 3.
What were the missing clauses?
The below clauses were a part of the older SEBI Circular No.MRD/DoP/SE/Dep/Cir-14/2007 dated December 20, 2007:
What is the net effect?
This seems to be a corrective circular which does not have a new impact on trades. The clauses 2 & 3 mention that short-selling is allowed but “naked short-selling” without giving delivery at the end of the day is not permitted.
If you read this with clause 4, you will find Institutions cannot short-sell and square off to be in compliance with clause 3.
However, since non-institutions are not covered by the above clause, they can short-sell and cover their positions intraday. Further, if you check clause 6, institutions can short-sell after borrowing from the SLB platform.
In case institutions are short-selling after borrowing shares, they will have to make disclosures to that effect (clause 8). We are speaking with the exchanges to confirm on this. I’ll update this thread once we have a confirmation on the reporting front mentioned in the clauses 8 & 9.