IDX Reactivates Short Selling, Here Is How It Works
Stock investment is generally known for the principle of buying shares at a certain price and selling them when the price rises to achieve a profit. However, in the capital market, there is a mechanism that allows investors to potentially gain profits when stock prices experience a decline. This mechanism is known as short selling.
The Indonesia Stock Exchange (IDX) has reactivated short selling transactions. The implementation of this policy will take effect from 15 September 2026. Subsequently, the exchange will publish a List of Short Selling Securities, as regulated under provision III.2 of Exchange Regulation No. II-H regarding Requirements and Trading of Securities in Margin Transactions and Short Selling Transactions, on 28 September 2026, which will become effective in October 2026.
The implementation of short selling had been delayed since 17 September 2025. On 13 March 2026, the Financial Services Authority (OJK) extended this delay. The IDX announced the extension on 16 March 2026. Most recently, on 9 September 2026, the OJK issued a letter regarding the determination of this policy.
For investors new to this instrument, short selling may sound quite complex because investors sell shares they do not actually yet own. In practice, this transaction is conducted through a securities lending mechanism with brokerage firms that provide short selling facilities.
What is a Short Selling Transaction?
According to the Indonesia Stock Exchange (IDX), a short selling transaction is a sale of shares that are not yet owned at the time the sale transaction is made. Investors are then obliged to provide or repurchase those securities to settle their positions.
Before conducting such transactions, investors must understand the rights and obligations related to short selling. Additionally, they must have opened a short selling securities account and signed a securities lending agreement with a brokerage firm.
Short selling transactions can only be performed on stocks that meet the short selling requirements, and the settlement of positions can occur on different trading days.
Through this mechanism, investors essentially attempt to capitalise on falling stock prices. Investors sell borrowed shares when the price is relatively high, then buy them back when the price drops. The difference between the selling price and the repurchase price becomes the source of profit, after deducting transaction costs and securities lending fees, if any.
How Short Selling Works
Simply put, the short selling mechanism can be described through several stages. First, investors must have a specific short selling securities account and trade through Exchange Members that are licensed to provide such services. Investors must also understand their rights and obligations and sign a securities lending agreement with the brokerage firm.
Investors are also required to provide initial collateral. Quoting the IDX website, initial collateral for margin and/or short selling transactions can be 50% of the transaction value or IDR 50 million, depending on the initial collateral value required by the Exchange Member.
Once the account and requirements are met, investors perform an analysis of the stocks they intend to trade. It should be noted that short selling cannot be performed on all stocks listed on the IDX. Transactions can only be conducted on securities included in the Short Selling Securities list and that meet the provisions set by the Exchange.
Investors then execute the sale of shares at ‘at tick’, which is the last formed price or last done price. Because the shares sold are not yet owned by the investor, there is an obligation to obtain those shares through permitted mechanisms to fulfil the transaction settlement.
As a simple illustration, an investor performs short selling on shares worth IDR 1 million when the stock price is still high. If the stock price subsequently drops by 10%, the investor can repurchase those shares at a value of approximately IDR 900,000. The difference between the selling price and the repurchase price reaches IDR 100,000.
However, that figure cannot be considered net profit. In the IDX illustration, if the short selling position is closed after 20 days, there is a securities lending fee assuming an interest rate of 15% per annum amounting to IDR 8,333. Additionally, there is a sell transaction fee of IDR 1,433 and a buy transaction fee of IDR 390. Thus, the net profit in this illustration becomes approximately IDR 89,844, or about 8.98% of the short selling transaction value.
What is Intraday Short Selling?
In addition to regular short selling, investors are also familiar with Intraday Short Selling (IDSS). The main difference between the two lies in the timing of position settlement.
In regular short selling, the short position can remain open for more than one trading day. Because the position can continue into the next day, this transaction requires a Securities Lending and Borrowing (PME) mechanism to support transaction settlement.
Meanwhile, in IDSS, the short position must be closed on the same trading day. In other words, investors perform a short sale of shares on the same day and then repurchase them before trading ends so that the position is netted off on that day.
Because there is no short position carried over to the next day, IDSS does not require securities lending fees as regular short selling does.
In the IDX illustration, an investor sells securities worth IDR 1 million and then repurchases them when the price drops to IDR 900,000. The difference remains IDR 100,000. After deducting a sell transaction fee of IDR 1,433 and a buy transaction fee of IDR 390, the net profit becomes approximately IDR 98,177, or 9.81% of the IDSS transaction value. This means that in this illustration, the net profit of IDSS is approximately 0.83 percentage points higher than regular short selling.