The Securities and Exchange Board of India (Sebi) has unveiled comprehensive proposals to overhaul the trading-related framework at stock exchanges, marking a significant step toward simplifying regulatory compliance and enhancing operational efficiency. The consultation paper released on Friday outlines extensive reforms aimed at consolidating fragmented regulations into a unified structure.

Consolidated Framework Structure

Sebi's primary proposal involves merging multiple overlapping provisions into a single, consolidated framework applicable to both equity and commodity segments. The unified structure will encompass trading rules, price bands, circuit breakers, bulk and block deal disclosures, call auction mechanisms, liquidity enhancement schemes, margin trading facility (MTF), unique client code (UCC), PAN requirements, trading hours, and daily price limits.

The regulator has suggested that provisions specifically applicable to clearing corporations should be separated and moved into a dedicated master circular to eliminate regulatory overlap and improve clarity.

Enhanced Margin Trading Facility Requirements

Significant changes have been proposed for the margin trading facility framework, with Sebi recommending substantial increases in financial requirements for participating brokers.

The enhanced net worth requirements reflect Sebi's focus on ensuring adequate financial backing for brokers offering margin trading services, while timeline adjustments aim to reduce administrative burden.

Transparency and Disclosure Improvements

Sebi has proposed significant modifications to disclosure mechanisms to improve market transparency and reduce manual reporting requirements. The regulator suggests merging bulk and block deal disclosures and shifting dissemination from the UCC level to the client PAN level, thereby streamlining reporting processes for brokers.

Additionally, market-wide circuit breaker rules, dynamic price band flexing, IPO price bands, and call auction procedures will be presented in standardized tabular formats to enhance clarity and accessibility.

Liquidity Enhancement and Market-Making Reforms

The consultation paper proposes removing obsolete market-making provisions for the cash segment and integrating them into a principle-based Liquidity Enhancement Scheme (LES) framework. This unified approach will cover equities, derivatives, and commodities under a single regulatory structure.

Under the revised framework, exchanges will gain greater flexibility in designing schemes, conducting half-yearly board reviews, and offering incentives. Higher caps will be available for new exchanges or new segments, providing additional operational latitude.

Operational Simplifications and Modernization

Sebi has identified numerous outdated provisions for removal, including negotiated-deal exemptions, guidelines for dedicated debt segments, forward contracts in commodities, MOU-based trading, and unnecessary reporting requirements. Trading hours across all segments—equity, derivatives, commodities, currency, RFQ, EGR, and the Social Stock Exchange—will be consolidated into a single comprehensive section.

Client Code Modification rules will be liberalized to permit genuine corrections, allow PAN-linked multiple UCCs for specified client categories, facilitate easier obligation transfer among FPI family accounts, and increase waiver frequency to once monthly while discontinuing quarterly waiver reporting to Sebi.

Implementation Timeline and Next Steps

The regulator has invited public comments on all proposed changes until January 30, providing market participants with an opportunity to provide feedback on the comprehensive reforms. The consultation process reflects Sebi's commitment to stakeholder engagement in developing the final regulatory framework.

These proposals represent part of Sebi's broader initiative to facilitate ease of doing business across stock exchanges, including commodity derivatives exchanges, while maintaining market integrity and investor protection standards.

The Securities and Exchange Board of India announced on Friday comprehensive simplifications to the accreditation process for investors participating in alternative investment funds, marking a significant step toward streamlining regulatory procedures in the AIF sector.

Streamlined Agreement Execution Process

Under the revised framework, investment managers now have enhanced flexibility in managing investor onboarding. They are permitted to execute contribution agreements and complete related formalities based on their own assessment of an investor's eligibility, eliminating the previous requirement to wait for formal accreditation certificates.

However, important safeguards remain in place to ensure regulatory compliance. The investor's commitment will not be counted toward the scheme's corpus until the accreditation certificate is formally issued, and AIFs can only accept funds after the investor becomes officially accredited.

Relaxed Net Worth Documentation Requirements

SEBI has significantly simplified the documentation process for accreditation based on net worth criteria. The regulator has abolished the mandatory requirement for investors to submit detailed break-ups of their net worth, reducing administrative burden and processing time.

Under the new guidelines, chartered accountants have greater flexibility in their certification process. They are no longer required to state the actual net worth figure, provided their certificate confirms that the investor meets the prescribed threshold requirements.

Compliance and Implementation Framework

To ensure proper oversight of these changes, SEBI has established clear compliance requirements for AIF stakeholders:

• Trustees must capture compliance with revised norms in Compliance Test Reports
• Sponsors are required to ensure adherence to new accreditation processes
• Investment managers must maintain proper documentation of eligibility assessments

These revised norms took effect immediately upon announcement, allowing market participants to benefit from the streamlined processes without delay.

Regulatory Context and Future Direction

The latest simplifications align with SEBI's broader initiative to enhance the AIF ecosystem's efficiency. In August, SEBI Whole Time Member Ananth Narayan G outlined the regulator's proposal for a new accredited investors-only AIF regime featuring reduced compliance requirements. This framework aims to enable sophisticated investors to support higher-risk ventures more efficiently while maintaining appropriate investor protection standards.

The immediate implementation of these changes demonstrates SEBI's commitment to responsive regulation that addresses market needs while preserving essential safeguards for investor protection and market integrity.