Short positions in G-Secs on cards to improve liquidity

The Reserve Bank of India has released draft rules permitting short positions in government securities to enhance market liquidity and price discovery. Under the proposal, short positions of up to 2 percent of outstanding stock or around Rs 500 crore, whichever is higher, will be allowed for liquid G-Secs, with banks and standalone primary dealers permitted to take long and short positions of up to 25 percent of the notified auction amount. The draft also outlines a detailed framework for trading in when-issued securities, with market participants required to submit feedback by July 17.