Secondary market transactions in Government Securities - Short Selling

Secondary market transactions in Government Securities - Short Selling
This has reference to circular IDMD.PCD.14/14.03.07/2011-12 dated December 28,
2011 on the captioned subject.
2. As per extant guidelines, banks are permitted to undertake 'notional' short sale
whereby they can sell a security short from HFT portfolio even if the security is held
under their AFS/HTM portfolio (circular RBI/2006-07/243 dated January 31, 2007). In
view of the various scenarios under which a participant may end up with simultaneous
‘long’ and ‘short’ position in specific securities in the HFT portfolio (Annex), it has
been decided to permit ‘notional’ short sale from the HFT portfolio even if the
concerned security is held under the HFT portfolio subject to the condition that the
participant undertaking the ‘notional’ short sale would cover the same through a
subsequent outright purchase or carry the short position beyond overnight by
acquiring the security under reverse repo but not use the securities already held in
the HFT portfolio for delivery against the short sale.
3. All other terms and conditions contained in the aforementioned circulars remain
unchanged.