Securities lending in India
Via Ajay Shah, a recent Business World article - Plugging The Hole - that explains how the introduction of securities lending will bring the Indian stockmarket much closer to global standards.
The irony of the matter is that Sebi plans to restrict short sales and securities lending to only those stocks on which derivatives trading is already available.
. . . for derivatives traders, short selling is a blessing. Futures ought to trade at a fair premium to spot prices. But at times, futures trade at a low premium, or even at a discount to spot prices . . . This presents an arbitrage opportunity, where a trader can buy the low-priced futures contract and then sell in the spot market. “With short sales being allowed, such arbitrage opportunities can result in actual profit”.
Very informative - be sure to read it in its entirety.
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