With the sharp fall in the markets of over 36% since Feb, there were calls to ban short selling. There have been reports that ETF selling and algo selling had worsened the fall in the markets. Of course, the regulator stopped short of imposing a ban on short selling. Instead, it tweaked the MWPL limits and the margin requirements to discourage the creation of naked short positions. Here is how the restrictions will work. Remember, short selling in India is possible in multiple ways. For example, it is possible to sell shares for intraday, without having delivery. One can also borrow and sell shares but that is still not too popular in India. The most popular is the selling of futures on stocks without having an underlying cash market position. For example if you are holding RIL and sell RIL futures, it is a hedged position; otherwise it is naked short selling of futures. The intent is only to curb naked short selling. It may still work in curbing speculation but it may be a little too late to matter.