Unless you've been living under a rock, you're probably aware of GME and how Melvin Capital got short-squeezed out of their positions. More details on the pinned post by mod :
I am now appreciating how well designed our markets are. We are following some of the best design practices from long time :
SLB :
Stocks lending and borrowing is the only way you can borrow stocks for short time. This is highly regulated and the only viable usage of this is for arbitration by certain mutual funds/individuals. No one can think of using SLB to short the markets !
Circuits / Different Tiers:
Whenever SEBI / Exchanges becomes aware of stock manipulation , they will change the stock category or worst case bring the stock to T2T mode where you need to have shares to sell the stock ( no intraday trading allowed ) . We even have lower circuit limits like 5% for certain category. Massive Surveillance is also done for these manipulated stocks and SEBI/Exchanges will try there level best to bring into justice folks behind the manipulation. ( Not so easy task as many would use stolen or forged demat/trading accounts ). To go to say 2000%+ which GME is easily breaching , one needs to wait for months and by that time SEBI will swing into action
Strict F&O limits:
We have strict limits when it comes to Open Interest of derivates. One cannot have OI more than the free floating capital. Not just that there are individual member limit, max trading member limit( you cannot buy/sell certain call option strike price in zerodha because of this ) , Increased VAR+EL margins for risky stocks etc., + we have F&O only for major stocks which is tough to manipulate. Stock options are settled during expiry and cannot be exercised at will like US.
I am not saying there are no manipulation of stock price in India - We get those nasty SMS of penny stocks often but what I am saying is Indian stock exchange follows the best designs and practices so that there are no systematic abuse / failures.
Only concern :
We recently introduced physical settlement of stock options. I firmly believe we should have retained our old way of cash settlement. Physical delivery will case impact in stock price as suddenly huge quantity of stock needs to be brought/sold in open market
Please note : Kindly do not try to pump money into GME/Discuss how to buy GME etc., here - Else this thread will be removed by mod. SEC is on it and will probably halt the trading or introduce some new law to prevent this abuse. One cannot openly abuse/manipulate the prices . So warning to those who are planning to ride this wave - you will be crushed sooner or later.
Update : Zerodha has come up with an excellent article for the points mentioned above - A must read :
https://zerodha.com/z-connect/trending/shorting-and-indian-capital-markets
I am now appreciating how well designed our markets are. We are following some of the best design practices from long time :
SLB :
Stocks lending and borrowing is the only way you can borrow stocks for short time. This is highly regulated and the only viable usage of this is for arbitration by certain mutual funds/individuals. No one can think of using SLB to short the markets !
Circuits / Different Tiers:
Whenever SEBI / Exchanges becomes aware of stock manipulation , they will change the stock category or worst case bring the stock to T2T mode where you need to have shares to sell the stock ( no intraday trading allowed ) . We even have lower circuit limits like 5% for certain category. Massive Surveillance is also done for these manipulated stocks and SEBI/Exchanges will try there level best to bring into justice folks behind the manipulation. ( Not so easy task as many would use stolen or forged demat/trading accounts ). To go to say 2000%+ which GME is easily breaching , one needs to wait for months and by that time SEBI will swing into action
Strict F&O limits:
We have strict limits when it comes to Open Interest of derivates. One cannot have OI more than the free floating capital. Not just that there are individual member limit, max trading member limit( you cannot buy/sell certain call option strike price in zerodha because of this ) , Increased VAR+EL margins for risky stocks etc., + we have F&O only for major stocks which is tough to manipulate. Stock options are settled during expiry and cannot be exercised at will like US.
I am not saying there are no manipulation of stock price in India - We get those nasty SMS of penny stocks often but what I am saying is Indian stock exchange follows the best designs and practices so that there are no systematic abuse / failures.
Only concern :
We recently introduced physical settlement of stock options. I firmly believe we should have retained our old way of cash settlement. Physical delivery will case impact in stock price as suddenly huge quantity of stock needs to be brought/sold in open market
Please note : Kindly do not try to pump money into GME/Discuss how to buy GME etc., here - Else this thread will be removed by mod. SEC is on it and will probably halt the trading or introduce some new law to prevent this abuse. One cannot openly abuse/manipulate the prices . So warning to those who are planning to ride this wave - you will be crushed sooner or later.
Update : Zerodha has come up with an excellent article for the points mentioned above - A must read :
https://zerodha.com/z-connect/trending/shorting-and-indian-capital-markets