The Securities and Exchange Board of India (Sebi) has announced comprehensive proposals to overhaul stock exchange regulations, targeting the elimination of redundancies, retirement of outdated provisions, and improvement of operational efficiency for exchanges and market participants. This sweeping reform initiative represents the second phase of Sebi's ease-of-doing-business measures following the regulator's consultation paper released in October.

Enhanced Net-Worth Requirements for Margin Trading

Sebi has proposed significant changes to the financial requirements for stockbrokers offering margin trading facilities (MTF). The key modifications include:

The existing ₹3 crore threshold, introduced in 2004 as a safeguard to ensure only institutional participants offered margin trading, has remained unchanged since its last review in 2022. Under the new framework, exchanges would gain authority to revise net-worth requirements independently without seeking prior regulatory approval.

Streamlined Compliance and Reporting Timelines

The regulator has proposed revised timelines for net-worth certificate submissions by brokers offering MTF services. The new framework establishes different deadlines based on reporting periods:

• Half-year ended September 30: 45-day submission timeline
• Half-year ended March 31: 60-day submission timeline

These changes align with Sebi's August 2025 decision to synchronize net-worth certificate submission timelines with financial result declaration requirements under listing regulations. To maintain consistency, the regulator has also proposed extending auditor certificate submission timelines to match the revised net-worth schedules.

Regulatory Modernization and Consolidation

Sebi's reform package addresses several outdated regulatory provisions that have become obsolete over time. The regulator plans to remove market-making provisions issued in 2000, which are no longer utilized by exchanges. Modern exchanges now prefer liquidity enhancement schemes (LES), which offer greater flexibility and operate on principle-based frameworks.

The consultation paper proposes merging commodity derivatives provisions with equity cash and equity derivatives under a unified framework. This consolidation would encompass market making and volume enhancement schemes, with simplified approval, monitoring, and review processes. A streamlined half-yearly board review would replace the current system of multiple reviews and approvals.

Operational Enhancements for Market Participants

The proposed reforms include several measures designed to ease operational requirements for exchanges and market participants:

• Simplified client code modification procedures
• Increased error waiver frequency from quarterly to monthly
• Elimination of quarterly waiver reporting to Sebi
• Replacement of special inspections with regular exchange monitoring
• Removal of end-of-day surveillance report requirements for pre-open call auction alerts

SME Platform Clarifications and Commodity Market Incentives

Sebi has addressed regulatory clarity issues for companies listed on the SME platform following corporate restructuring events such as demergers. The regulator proposes incorporating earlier clarifications that market making requirements would apply unless the demerged company has already fulfilled these obligations.

For commodity derivatives, Sebi has proposed incentivizing farmer and farmer producer organization (FPO) participation in options trading by utilizing option premiums paid by these entities. This initiative aims to enhance agricultural sector engagement in derivative markets.

Policy Context and Implementation Timeline

These comprehensive reforms align with Finance Minister Nirmala Sitharaman's Union Budget directive for FY24, which emphasized simplifying compliance and reducing costs for financial sector participants through consultative processes. The current proposals represent the second installment in Sebi's series of ease-of-doing-business measures, with the ultimate goal of issuing a single consolidated circular covering all trading-related provisions.

The draft consultation paper remains open for stakeholder comments until January 30, 2026, allowing market participants to provide feedback on the proposed regulatory changes before final implementation.

The Securities and Exchange Board of India (Sebi) has introduced comprehensive reforms to streamline the accredited investor onboarding process for alternative investment funds (AIFs), addressing long-standing industry concerns about operational delays and procedural inefficiencies. The changes, notified through a circular on Friday, take effect immediately and are expected to significantly reduce friction for high net worth investors accessing private market products.

Revised Onboarding Framework

Under the new framework, AIF managers gain substantial operational flexibility in processing investor applications. Investment managers can now proceed with critical onboarding steps based on their own assessment of whether an investor meets eligibility criteria, without waiting for formal accreditation certificates from recognized agencies.

The revised process allows managers to:

• Finalize and execute contribution agreements before certification
• Initiate related operational processes during the accreditation period
• Complete key documentation requirements in parallel with certification

Compliance Safeguards and Restrictions

Sebi has established clear operational guardrails to maintain investor protection standards while enabling process improvements. The regulator has specified strict limitations on fund management activities during the interim period.

Documentation Requirements Simplified

The regulator has significantly eased documentation burdens for net worth-based accreditation following market representations. Previously, chartered accountants were required to provide detailed net worth breakdowns as annexures to certificates, creating additional administrative complexity.

Under the revised requirements:

• Detailed net worth breakdowns are no longer mandatory
• Chartered accountants can optionally specify exact net worth figures
• Confirmation of meeting prescribed thresholds remains sufficient
• Overall documentation burden is substantially reduced

Industry Context and Background

The reforms address sustained industry feedback regarding the accreditation framework introduced in 2021, which had become operationally cumbersome for market participants. Accredited investors are individuals or entities meeting specified income or net worth thresholds, presumed to have the financial capacity and understanding for higher-risk investment products.

Currently, accreditation is conducted exclusively by recognized agencies, including subsidiaries of stock exchanges and depositories. The framework ensures that only qualified investors can access alternative investment products while maintaining appropriate regulatory oversight.

Implementation and Compliance

The circular places primary responsibility for compliance with revised requirements on AIF trustees, sponsors, and managers through the compliance test report mechanism. This internal control system, prescribed under Sebi's master circular for AIFs, ensures adherence to regulatory standards while enabling operational flexibility.

The immediate implementation of these changes reflects Sebi's commitment to addressing market inefficiencies while maintaining robust investor protection standards in the alternative investment sector.