SEBI Proposes Comprehensive Reforms to Streamline Stock Exchange Operations

The Securities and Exchange Board of India (SEBI) has announced significant proposals aimed at overhauling the trading framework within stock exchanges. This initiative, shared on January 30, is designed to simplify existing regulations, eliminate redundancies, and alleviate the compliance burden for market participants. The changes are part of SEBI’s broader strategy to enhance the ease of doing business across various trading platforms, including commodity derivatives exchanges.

In a detailed consultation paper, SEBI outlined plans to consolidate multiple overlapping provisions related to trading practices, price bands, circuit breakers, and disclosure requirements for bulk and block deals. The regulator aims to create a unified framework that applies equally to both equity and commodity markets. Specific provisions applicable to clearing corporations will be separated and moved to a dedicated master circular to avoid regulatory overlaps.

To enhance transparency, SEBI proposed merging bulk and block deal disclosures and shifting the dissemination of information to the client PAN level instead of the unique client code (UCC) level. This adjustment is intended to reduce the manual reporting requirements for brokers, streamlining the compliance process.

Under the proposed framework, SEBI also plans to present market-wide circuit breaker rules and dynamic price band flexing in a clear tabular format. Several outdated operational examples will be eliminated to ensure that the guidelines remain relevant. Additionally, there are recommendations to rationalise margin trading facility (MTF) norms, including increasing the minimum net worth requirement for brokers from Rs 3 crore to Rs 5 crore or higher, as determined by exchanges.

Timelines for submitting net worth and auditor certificates will be aligned with financial reporting cycles, while unnecessary due diligence clauses will be removed. The proposals also include the elimination of obsolete market-making provisions in the cash segment, merging them into a principle-based Liquidity Enhancement Scheme (LES) that uniformly covers equities, derivatives, and commodities.

Exchanges are set to gain more flexibility in designing their schemes, conducting half-yearly board reviews, and offering incentives. Higher caps for new exchanges or segments are also part of the proposed reforms. Outdated provisions, including negotiated-deal exemptions and guidelines for a dedicated debt segment, are targeted for removal.

Trading hours will be standardised across all segments, including equity, derivatives, commodities, and the Social Stock Exchange. Client Code Modification rules will be liberalised to allow genuine corrections and facilitate easier obligation transfers among Foreign Portfolio Investor (FPI) family accounts. The frequency of waivers is proposed to increase to once a month, while quarterly waiver reporting to SEBI will be discontinued.

SEBI aims to clarify provisions on short-selling and securities lending and borrowing (SLB), incorporating these into the main framework with mandates for daily disclosures. Responsibilities for exchanges and clearing corporations will be distinctly outlined. Furthermore, disclosures specific to commodities, such as hedger delivery intent and open interest data, will be integrated into the unified regulatory framework.

In addition, SEBI proposes updates to provisions regarding UPI-based trading with blocked amounts in the secondary market, transferring settlement-related aspects to the clearing corporation master circular.

The regulator is inviting public feedback on these proposals until January 30. The anticipated reforms represent a significant shift in India’s trading landscape, aiming to foster a more efficient and transparent market environment.