Markets regulator Sebi has unveiled comprehensive proposals to overhaul the trading-related framework at stock exchanges, targeting simplification of rules, elimination of duplication, and reduction of compliance burden for market participants. The initiative forms part of Sebi's broader strategy to facilitate ease of doing business across all stock exchanges, including commodity derivatives platforms.
Unified Framework Consolidation
Sebi's consultation paper proposes merging multiple overlapping provisions into a single, consolidated framework applicable to both equity and commodity segments. The unified system will encompass:
- Trading rules and price bands
- Circuit breakers and call auction mechanisms
- Bulk and block deal disclosures
- Margin trading facility (MTF) operations
- Unique client code (UCC) and PAN requirements
- Trading hours and daily price limits
- Liquidity enhancement schemes
The regulator suggests carving out provisions specifically applicable to clearing corporations and moving them into a dedicated master circular to avoid regulatory overlap.
Enhanced Transparency and Reporting
To improve market transparency, Sebi proposes significant changes to disclosure mechanisms:
| Current System |
Proposed Changes |
| UCC-level disclosures |
PAN-level bulk and block deal disclosures |
| Manual broker reporting |
Reduced manual reporting requirements |
| Separate frameworks |
Merged bulk and block deal disclosures |
The regulator recommends presenting market-wide circuit breaker rules, dynamic price band flexing, IPO price bands, and call auction procedures in tabular format while removing duplicative or outdated operational examples.
Margin Trading Facility Reforms
Sebi has proposed substantial changes to MTF norms, including key financial requirements:
| Parameter |
Current Requirement |
Proposed Requirement |
| Minimum Net Worth |
₹3.00 crore |
₹5.00 crore or higher |
| Certificate Timelines |
Current schedule |
Aligned with financial reporting cycles |
| Due Diligence |
Multiple clauses |
Streamlined requirements |
The proposals 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 framework 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. Under the revised structure, exchanges will gain greater flexibility in designing schemes, conducting half-yearly board reviews, and offering incentives, with higher caps for new exchanges or new segments.
Operational Simplifications
Sebi proposes eliminating several outdated provisions, 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 Social Stock Exchange—will be consolidated into a single section.
Client Code and Compliance Liberalisation
The proposals include liberalising Client Code Modification rules 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 monthly
- Discontinue quarterly waiver reporting to Sebi
Penalties will be harmonised between exchanges and clearing corporations, while short-selling and securities lending and borrowing provisions will be clarified and incorporated into the main framework with mandated daily disclosures.
Implementation Timeline
Sebi has invited public comments on all proposals until January 30, indicating the regulator's commitment to stakeholder consultation before implementing the comprehensive framework changes.
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