It will soon become mandatory for institutional investors to disclose their transaction details during short sales.

According to the soon-to-be-released rules, at the time of transaction investors have to disclose if the deal is a short sale at the time of placement of order.

Further, institutional investors would also have to demonstrate their ability to borrow while executing their orders for short sales, sources said.

It is also likely that the stock lending & borrowing mechanism, to be introduced simultaneously with short selling, would allow the participation of all classes of investors, including retail investors, if not at the beginning then at a later stage, sources said.

Short sales (the sale of share an investor does not own at the time of trade) by institutions was given the go-ahead by the Securities and Exchange Board of India (Sebi) at its board meeting last week.

The scrip-wise short sale position details, as per the plan, will have to be disclosed and will be available in the public domain before the start of trading on the next day. It is also likely that short selling would be allowed only in those scrips, which are active in the derivatives segment. These scrips, it is likely, will also be those that are in the major stock indices.

Another significant feature of the proposed short sales, sources said, is likely that institutional investors would be barred from day-trading or squaring off transactions during intra-day. Naked sales or short sales without delivery will also be prohibited.

Simply put, institutional investors would be required to mandatorily honour of delivering the securities at the time of settlement.

There was also a possibility of Sebi allowing short sales only on an uptick and not on a downtick. This would mean that an investor who is selling a stock say at Rs 100, then this investor would be allowed to further go short in the counter only at a price higher than Rs 100. This measure would help the market from overheating even while curbing a sell-off intended at suppressing the share prices.