NewsStocksSEBI Proposes Comprehensive Trading Rules Overhaul to Simplify Regulations and Cut Compliance CostsSEBI Proposes Comprehensive Trading Rules Overhaul to Simplify Regulations and Cut Compliance Costs
SEBI has proposed a comprehensive overhaul of trading rules for stock exchanges to simplify regulations and reduce compliance costs. Key changes include consolidating trading provisions across equity and commodity segments, raising MTF broker net-worth requirements from ₹3 crore to ₹5 crore, and streamlining liquidity enhancement schemes into a single framework. The regulator also plans to merge disclosure frameworks, improve bulk deal reporting, and remove obsolete provisions while allowing more operational flexibility. Public comments on these proposals are invited until January 30.
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The Securities and Exchange Board of India (SEBI) has announced a comprehensive proposal to overhaul trading-related rules for stock exchanges, marking a significant step in its ease of doing business agenda. The regulator aims to simplify regulations, eliminate duplication, and reduce compliance costs through wide-ranging reforms that would create a more streamlined regulatory environment.
Regulatory Consolidation Framework
SEBI has proposed consolidating and rationalising provisions under Chapter 1 (Trading) of the master circular for stock exchanges and clearing corporations, along with relevant sections of the commodity derivatives master circular. The proposed framework would apply uniformly across equity cash, equity derivatives, and commodity derivatives segments, creating consistency in regulatory approach.
The regulator plans to merge the two existing disclosure frameworks and has clarified that bulk deal information should be disseminated at the client level, mapped to PAN, rather than at the unique client code level. Since exchanges already have access to client-level data, this change would reduce back-and-forth communication with brokers while maintaining the original regulatory intent of transparency.
Enhanced Margin Trading Requirements
Significant changes have been proposed for margin trading operations, with SEBI suggesting an increase in the minimum net-worth requirement for brokers offering margin trading facility (MTF).
| Parameter: | Current Requirement | Proposed Requirement |
|---|---|---|
| Minimum Net-Worth for MTF Brokers: | ₹3.00 crore | ₹5.00 crore |
| Exchange Flexibility: | Fixed threshold | Can prescribe higher thresholds |
| Compliance Timeline: | Separate cycles | Aligned with financial reporting cycles |
The timelines for submitting net-worth and auditor certificates are proposed to be aligned with financial reporting cycles, which would ease compliance pressure on market participants.
Liquidity Enhancement Scheme Reforms
SEBI has proposed a significant revamp of liquidity enhancement schemes (LES) and market making operations. The regulator plans to subsume market making schemes into a single, principle-based LES framework applicable across all segments. This consolidated approach would replace multiple layers of approvals and monitoring with a streamlined single half-yearly board review process.
The proposal removes the requirement for exchanges to submit half-yearly effectiveness reports to SEBI, further reducing administrative burden. To support newer exchanges or new segments, SEBI has proposed allowing incentives of up to 25 per cent of net worth for the first five years of operations in a segment, subject to safeguards against artificial volumes or market manipulation.
Additional Regulatory Improvements
The proposed changes include several operational enhancements designed to improve market functioning:
- Tabulating rules on circuit breakers, price bands, and pre-open auctions for better clarity
- Deleting obsolete provisions on negotiated deals and Foreign Portfolio Investor (FPI) exemptions
- Simplifying PAN and client code rules for easier compliance
- Allowing more flexibility for genuine client code modifications without penalty
Public Consultation Process
SEBI has invited public comments on these comprehensive proposals, with the consultation period remaining open until January 30. This timeline allows market participants, exchanges, and other stakeholders sufficient opportunity to provide feedback on the proposed regulatory changes before implementation.
The proposed overhaul represents SEBI's commitment to creating a more efficient and business-friendly regulatory environment while maintaining market integrity and investor protection. The consolidation of rules across different market segments and the reduction in compliance requirements are expected to benefit both exchanges and market participants through simplified operations and reduced costs.
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