The Securities and Exchange Board of India (Sebi) announced on Friday a series of regulatory proposals aimed at standardising compliance and enhancing market integrity across India's financial exchanges. The comprehensive framework addresses trading disclosures, margin trading requirements, and liquidity enhancement mechanisms.

Enhanced Net-Worth Requirements for Margin Trading

Sebi has proposed a significant increase in capital requirements for stock brokers offering margin trading facilities. The regulator recommends raising the minimum net-worth requirement from the existing ₹30.00 crores to ₹50.00 crores, representing a substantial 66.67% increase in capital adequacy standards.

Uniform Trading Disclosure Framework

The regulator has outlined plans to implement standardised trading-related disclosure requirements across all major Indian exchanges. This initiative will create uniform compliance standards for:

• India's three stock exchanges
• Two commodity exchanges
• All trading participants and intermediaries

The standardisation effort aims to eliminate regulatory arbitrage and ensure consistent investor protection measures across different trading platforms.

Extension of Liquidity Enhancement Schemes

Sebi proposed expanding liquidity enhancement rules to commodity derivatives, extending beyond their current application to equity and equity derivatives markets. These financial incentives are designed to encourage brokers to boost trading volumes while maintaining market integrity.

Regulatory Safeguards and Limitations

The regulator has established clear guidelines to prevent market manipulation through liquidity enhancement schemes:

• Schemes must not create artificial trading volumes
• Incentives should not reduce overall market liquidity
• All activities must maintain non-manipulative characteristics

Incentive Structure for New Market Segments

Sebi has outlined a structured approach for exchanges launching new trading segments:

Market Impact and Implementation

The proposals could particularly benefit India's National Commodity and Derivatives Exchange (NCDEX), which has announced plans to launch equity offerings during the current year. The enhanced liquidity schemes for commodity derivatives may provide additional market-making incentives for this expansion.

These regulatory changes reflect Sebi's continued efforts to strengthen market infrastructure while promoting fair and transparent trading practices across India's evolving financial landscape.

The Securities and Exchange Board of India (SEBI) has released a significant consultation proposal regarding the sharing of price data for investor education and awareness initiatives. The market regulator has proposed implementing a uniform 30-day time lag for sharing market data for academic and educational purposes, marking a balanced approach to address growing concerns over data misuse.

Evolution of SEBI's Data Sharing Framework

SEBI's approach to market data sharing has undergone several changes in recent months. The regulator currently permits stock exchanges and market intermediaries to share price data for purely educational purposes, subject to specific time restrictions for entities whose activities focus exclusively on investor education.

The regulatory timeline shows a progressive tightening of controls:

Addressing Regulatory Overlap Concerns

SEBI has expressed significant concern about entities using live or near-real-time market data under the pretext of education, which can blur the line between genuine educational content and investment advice. The regulator emphasized that using live data for educational purposes falls outside the scope of pure educational activity.

Key regulatory concerns include:

• Analysis of current data to predict future prices
• Activities that effectively constitute investment advisory services
• Overlap with Research Analyst regulatory frameworks
• Potential circumvention of established compliance requirements

The consultation paper specifically noted that such activities fall under the definition of Investment Advisory (IA) and Research Analyst (RA) activities, which are subject to strict regulatory oversight.

Stakeholder Feedback and Balanced Approach

The proposed 30-day lag represents a compromise based on extensive stakeholder feedback. Market participants raised concerns at both ends of the regulatory spectrum, highlighting the challenges of the previous framework.

Stakeholder concerns addressed:

• One-day lag considered too short and prone to misuse
• Three-month restriction made educational content stale and ineffective
• Need for relevant yet protected educational material
• Balance between regulatory compliance and educational value

SEBI stated that a 30-day time lag would sufficiently protect against misuse of exchange data while keeping educational content relevant for genuine learning purposes.

Market Maturity and Compliance Requirements

The regulatory framework reflects the current maturity level of India's financial markets compared to developed exchanges. While established markets like the NYSE offer historical market data products on a T+1 basis, the domestic market faces unique challenges with widespread mis-selling by unregulated financial influencers.

Persons engaged solely in education must comply with prohibitions outlined in the January 2025 circular, including restrictions on activities that could be construed as advisory or recommendation-based. The regulator has identified a concerning trend of individuals and institutions presenting themselves as educators while operating like trading firms, exploiting investors without proper market understanding.

Implementation and Future Considerations

The proposed framework aims to address the rise of entities operating under the guise of financial education while actually providing unregulated investment services. SEBI acknowledges concerns about potential impacts on genuine academic activities and suggests keeping provisions open for legitimate academicians on a case-by-case basis with appropriate safeguards.

The consultation represents SEBI's continued effort to balance investor protection with legitimate educational needs, ensuring that market data sharing serves genuine educational purposes without compromising regulatory integrity.

Source: https://www.thehindubusinessline.com/markets/sebi-move-to-restrict-sharing-use-of-price-data-for-education-with-30-days-lag-a-right-step/article70491138.ece