India's SEBI plans securities lending reforms as BSE introduces shorter contracts

The Securities and Exchange Board of India (SEBI) is planning to overhaul the nation’s securities lending and borrowing (SLB) market. The regulator aims to improve price discovery and strengthen the connection between cash and derivatives markets. Proposed reforms under discussion include net settlement, interoperability within the SLB framework, and expanding the range of eligible stocks.

These reforms are considered critical following the introduction of a Closing Auction Session for eligible shares. A well-functioning auction requires traders to access borrowed stock to act on price differences between cash and derivatives markets.

In a related development, BSE Clearing Limited (BSECL) has introduced three-working-day contracts within its SLB segment. These shorter-tenor contracts are designed to provide greater flexibility for short-term securities borrowing and delivery requirements, supporting inter-exchange arbitrage and improved price alignment across trading venues.