The Securities and Exchange Board of India (SEBI) has unveiled comprehensive proposals to overhaul the trading-related framework at stock exchanges, targeting simplified rules and reduced compliance burden for market participants. The initiative represents SEBI's broader commitment to facilitating ease of doing business across all stock exchanges, including commodity derivatives exchanges.

Consolidated Framework Structure

SEBI's consultation paper suggests merging multiple overlapping provisions into a single, consolidated framework applicable to both equity and commodity segments. The consolidation 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 proposed that provisions specifically applicable to clearing corporations should be separated and moved into a dedicated master circular to eliminate regulatory overlap. This structural change aims to create clearer demarcation of responsibilities between exchanges and clearing corporations.

Enhanced Margin Trading Facility Requirements

Significant changes have been proposed for margin trading facility norms, with SEBI suggesting an increase in minimum net worth requirements for brokers. The current requirement will be raised from ₹3.00 crore to ₹5.00 crore or higher, as specified by individual exchanges.

Timelines for submitting net-worth and auditor certificates will be aligned with financial reporting cycles, while redundant due diligence clauses will be deleted to streamline operations.

Transparency and Disclosure Improvements

To enhance market transparency, SEBI has proposed merging bulk and block deal disclosures and shifting dissemination to the client PAN level instead of the UCC level. This change will significantly reduce manual reporting requirements for brokers while improving data accuracy and accessibility.

The regulator suggests presenting market-wide circuit breaker rules, dynamic price band flexing, IPO price bands, and call auction procedures in tabular format for better clarity. Several duplicative or outdated operational examples will be removed to eliminate confusion.

Liberalized Client Code Modifications

Client Code Modification rules will undergo substantial liberalization to accommodate genuine market needs:

• Genuine Corrections: Permitted for legitimate client code modifications
• Multiple UCCs: PAN-linked multiple unique client codes allowed for specified client categories
• FPI Transfers: Easier obligation transfer among Foreign Portfolio Investor family accounts
• Waiver Frequency: Increased from current levels to once per month
• Reporting Requirements: Discontinuation of quarterly waiver reporting to SEBI

Streamlined Market Operations

SEBI proposes removing obsolete market-making provisions for the cash segment and merging them into a principle-based Liquidity Enhancement Scheme (LES) framework. This unified approach will cover equities, derivatives, and commodities uniformly, providing exchanges with greater flexibility in designing schemes and conducting half-yearly board reviews.

Trading hours across all segments, including equity, derivatives, commodities, currency, RFQ, EGR, and the Social Stock Exchange, will be consolidated into a single comprehensive section for operational efficiency.

Removal of Outdated Provisions

Several outdated provisions have been identified for elimination, including negotiated-deal exemptions, guidelines for dedicated debt segments, forward contracts in commodities, MOU-based trading, and unnecessary reporting requirements. These removals will significantly reduce administrative burden while maintaining market integrity.

Short-selling and securities lending and borrowing (SLB) provisions will be clarified and incorporated into the main framework, with daily disclosures mandated and clear demarcation of responsibilities between exchanges and clearing corporations.

Implementation Timeline

SEBI has invited public comments on these comprehensive proposals until January 30, allowing market participants to provide feedback on the proposed changes. The consultation process demonstrates SEBI's commitment to inclusive regulatory development and stakeholder engagement in shaping India's financial market infrastructure.

Markets regulator Sebi has announced comprehensive proposals to overhaul the trading-related framework at stock exchanges, targeting simplified rules and reduced compliance burden for market participants. The initiative, outlined in a consultation paper released on Friday, January 9, represents part of Sebi's broader push to facilitate ease of doing business across stock exchanges, including commodity derivatives exchanges.

Consolidated Framework Structure

Sebi has proposed merging multiple overlapping provisions into a single, consolidated framework applicable to both equity and commodity segments. The unified approach 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 suggests that provisions specifically applicable to clearing corporations should be carved out and moved into a dedicated master circular to avoid regulatory overlap.

Enhanced Transparency and Reporting

To improve market transparency, Sebi has proposed significant changes to disclosure mechanisms. The regulator suggests merging bulk and block deal disclosures and shifting dissemination to the client PAN level instead of the UCC level, thereby reducing manual reporting requirements for brokers. Market-wide circuit breaker rules, dynamic price band flexing, IPO price bands, and call auction procedures will be presented in tabular form, while several duplicative or outdated operational examples will be removed.

Margin Trading Facility Reforms

Sebi has outlined substantial changes to MTF norms, including raising the minimum net worth requirement for brokers from ₹3 crore to ₹5 crore or higher, as specified by exchanges. The proposals also include aligning timelines for submitting net-worth and auditor certificates with financial reporting cycles and deleting redundant due diligence clauses.

Liquidity Enhancement and Market Making

The regulator proposes removing obsolete market-making provisions for the cash segment and merging them into a principle-based Liquidity Enhancement Scheme (LES) framework that uniformly covers equities, derivatives, and commodities. Under the revised framework, exchanges will have greater flexibility in designing schemes, conducting half-yearly board reviews, and offering incentives, with higher caps for new exchanges or new segments.

Operational Simplifications

Several outdated provisions face elimination under the proposals, including negotiated-deal exemptions, guidelines for a dedicated debt segment, 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 section.

Client Code Modification rules will be liberalised to permit genuine corrections, allow PAN-linked multiple UCCs for specified client categories, facilitate easier obligation transfer among FPI family accounts, increase waiver frequency to once a month, and discontinue quarterly waiver reporting to Sebi. The framework will also harmonise penalties between exchanges and clearing corporations.

Additional Provisions

Short-selling and securities lending and borrowing (SLB) provisions will be clarified and incorporated into the main framework, with daily disclosures mandated and responsibilities of exchanges and clearing corporations clearly demarcated. Commodity-specific disclosures, including hedger delivery intent, open interest data, and risk disclosures by listed entities, will form part of the unified circular. The regulator also proposes updating provisions on UPI-based trading with blocked amounts in the secondary market, while shifting settlement-related aspects to the clearing corporation master circular.

Sebi has invited public comments on the proposals until January 30, providing market participants an opportunity to contribute to the framework's development.