SEBI Proposes Major Regulatory Overhaul for Stock Exchanges and Clearing Corporations

The Securities and Exchange Board of India (SEBI) has unveiled a sweeping proposal to simplify the regulatory framework governing stock exchanges and clearing corporations. Aimed at boosting the ease of doing business, the regulator plans to dismantle obsolete provisions and consolidate fragmented rules into a streamlined, efficient system.

Consolidating Circulars for Greater Regulatory Clarity

A central pillar of SEBI’s proposal is the radical simplification of the Master Circular for Stock Exchanges and Clearing Corporations. Currently, market infrastructure institutions (MIIs) must navigate a complex web of multiple circulars. To address this, SEBI intends to issue a single master circular for stock exchanges by merging provisions related to both equity and commodity derivatives exchanges.

Furthermore, the regulator plans to issue a dedicated master circular specifically for clearing corporations. To address the technical landscape, a separate consolidated circular will be introduced to cover common information technology requirements applicable to all MIIs. This move is designed to reduce ambiguity and ensure that compliance is driven by principles rather than navigating bureaucratic density.

Reducing Compliance Burdens and Redundant Reporting

In a significant move to reduce the administrative load on exchanges, SEBI has proposed a reduction in the number of periodic reports that must be submitted to the regulator. Many of these reports have become redundant in the modern trading era. SEBI intends to either discontinue these unnecessary filings or shift their oversight to the internal committees of the MIIs themselves.

The overhaul also targets specific operational hurdles. Key proposals include:

  • Direct Market Access (DMA): Discontinuing the mandatory registration requirement for investment managers providing DMA services.
  • Smart Order Routing (SOR): Introducing a more efficient single-window registration framework for brokers offering SOR services.
  • Option Contracts: Discontinuing the current Close-to-Money (CTM) norms for option contracts.
  • Audits and Limits: Reviewing the existing system and network audit framework and revisiting the norms governing position limits across various products.

Enhancing Investor Protection and Market Efficiency

Beyond administrative ease, the proposal seeks to modernize investor-related frameworks. SEBI is looking to review disclosure requirements for commodity derivatives investors and update the client code modification framework to better suit current market practices.

Crucially, the regulator has suggested merging the Investor Protection Funds (IPF) for the equity and commodity segments. This consolidation aims to create a more unified and robust safety net for market participants. By reducing duplication and improving operational flexibility, SEBI intends to create a market environment that is both highly regulated and commercially agile.

Stakeholders and market participants have been invited to submit their comments on these proposals until July 13, 2026, after which a final framework will be notified.

Key Takeaways

  • Streamlined Documentation: SEBI aims to consolidate multiple disparate circulars into single master circulars for exchanges, clearing corporations, and IT requirements.
  • Reduced Red Tape: The proposal includes discontinuing redundant periodic reports and simplifying registration processes for DMA and SOR services.
  • Structural Integration: The regulator plans to merge investor protection funds for equity and commodity segments to enhance market efficiency.