SEBI eases reporting requirement for FIIs

Market regulator SEBI on Tuesday relaxed the reporting requirement on lending of securities by FIIs for the purpose of short selling.

FIIs now have to disclose the information on a weekly basis instead of daily. However, foreign institutional investors issuing participatory notes will have to immediately report their short position.

PNs are instruments through which unregistered entities in India invest in stock markets while short-selling means selling of borrowed shares at high prices with the intention of repurchasing them in the future when the prices fall.

"It has been decided to modify the periodicity of these reports from daily submissions to weekly submissions...The FIIs shall now be required to submit the reports every Friday," the Securities and Exchange Board of India said in a circular.

The circular becomes effective from July 2. However, analysts feel the new requirements will not have much implications as the securities lending market is not very mature in India. Securities lending means a brokerage lending securities owned by its clients to short-sellers.

As per the data available on the National Stock Exchange, daily data on the Securities Lending and Borrowing  segment shows little action. "It really does not make any difference as to whether the data is submitted on a daily, weekly or quarterly basis as hardly any trade is executed in SLB segment in India," SMC Capitals Equity Head Jagannadham Thunuguntla said.

However, in other countries, such as the US, where the securities lending is a big market, the order would have made a difference, he said.

The market regulator said that public dissemination of the disclosure by FIIs will be made twice in a week -- on Tuesday and Friday.