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Business & Stocks Business Standard • Oct 24, 2026

SEBI Reviews Short Selling and SLB Frameworks to Enhance Liquidity, Price Discovery, and Bond Market-Making

💡 Key Takeaways

•SEBI is reviewing short-selling and SLB rules to improve market liquidity and price discovery.
•The regulator is advancing reforms across clearing, broker compliance, custodial services, and corporate bond market-making.
•New initiatives include terminal misuse safeguards, an AI sandbox, and preparations for the Demat 2.0 rollout to boost regional retail broking.

NEW DELHI [NCRBuzz Wire] — ### Regulatory Overhaul to Boost Liquidity and Price Discovery

NEW DELHI [NCRBuzz Wire] — The Securities and Exchange Board of India (SEBI) has initiated comprehensive reviews of its short-selling and Securities Lending and Borrowing (SLB) frameworks to actively improve market liquidity and optimize price discovery. Spearheaded by SEBI Chairman Tuhin Kanta Pandey, this strategic policy recalibration is designed to deepen capital markets, reduce overall compliance costs, and expand corporate bond market-making avenues.

### Clearing, Compliance, and Technological Safeguards

To reinforce market integrity, the regulator is executing systemic reforms across clearing mechanisms, broker compliance standards, and custodial services. Concurrently, SEBI is institutionalizing terminal misuse safeguards to curb cybersecurity vulnerabilities, alongside finalizing responsible artificial intelligence guidelines and deploying an innovative AI sandbox to test advanced algorithmic surveillance.

### Expanding Retail Footprint and Financial Inclusion

Addressing broader structural goals, Chairman Tuhin Kanta Pandey highlighted that the next wave of retail broking growth will originate from smaller towns and villages. To support this grassroots expansion, the regulator is laying the groundwork for the Demat 2.0 initiative, aimed at modernizing depository architectures and driving widespread financial inclusion across semi-urban and rural regions.

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🏛️ Background Context

The policy review aligns with SEBI's mandate under the Securities and Exchange Board of India Act, 1992, to upgrade market infrastructure, enhance algorithmic supervision, prevent terminal misuse, and expand liquidity avenues within corporate debt and equity lending segments while driving financial inclusion across smaller cities and towns.

💡 Citizen & Commuter Quick Explainer (FAQ)

Q1: What areas are covered under SEBI's current regulatory review?

SEBI is reviewing short selling and Securities Lending and Borrowing (SLB) frameworks alongside AI guidelines and broker compliance norms.

Q2: Why are these structural market updates being implemented?

The measures aim to improve capital efficiency, enhance secondary market depth, and strengthen supervision across financial exchanges.

Q3: What is the immediate next step in this regulatory process?

The regulator is finalizing responsible AI guidelines and graded compliance frameworks for institutional brokers.

Verified Wires: Business Standard, Google News Business, Economic Times Markets Original Wire Dispatch ↗

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