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021 Short Selling Policy

Objective

This policy outlines the framework governing short selling of securities by clients, in compliance with regulations issued by SEBI and stock exchanges (NSE/BSE). It defines permissible activities, risk controls, and client obligations.

Regulatory framework

Short selling is permitted in the Indian securities market subject to SEBI and exchange guidelines. Naked short selling is strictly prohibited. All short sale transactions must result in delivery at the time of settlement.

Definition

Short selling refers to the sale of a security that the seller does not own at the time of trade execution, with the intention of purchasing it later.

Client eligibility

  • •All clients with an active trading account with Diamond Hands LLP may undertake short selling, subject to margin and risk controls.
  • •Institutional clients must declare short sell positions at the time of order placement as per regulatory requirements.

Permissible short selling

a) Retail clients

  • •Permitted only on an intraday basis.
  • •Positions must be squared off within the same trading day.

b) Institutional clients

  • •Permitted subject to regulatory disclosures at order level.

c) Positional short selling

1. Margin requirements

  • •Clients must maintain applicable upfront margins (VaR, ELM, and any additional margins as prescribed).
  • •Diamond Hands LLP reserves the right to impose higher margins or restrict trading in specific securities.
  • •Margin shortfall may result in square-off without prior notice.

2. RMS square-off mechanism

  • •All intraday short positions must be squared off on or before the RMS cut-off time of 3:20 PM.
  • •Diamond Hands LLP reserves the right to auto square-off open positions after this time without prior notice.
  • •Positions may also be squared off earlier in case of margin shortfall or abnormal market volatility.

3. Delivery obligations and auction

  • •Clients must ensure timely availability of securities for settlement.
  • •Failure to deliver will result in exchange auction.
  • •All auction losses, penalties, and charges shall be borne entirely by the client.

4. Restricted securities

  • •Short selling may be restricted in securities under ASM/GSM or as per exchange/regulatory directives.
  • •Diamond Hands LLP may impose additional internal restrictions at its discretion.

5. Risk disclosure

  • •Short selling carries high risk, including potential for unlimited losses.
  • •Clients are advised to monitor positions and maintain adequate margins at all times.

6. Compliance and reporting

  • •Diamond Hands LLP shall comply with all regulatory reporting requirements.
  • •Institutional short selling shall be reported as per SEBI and exchange norms.

Policy review

This policy is subject to periodic review and may be updated in line with regulatory changes and internal risk management practices.