SEBI Proposes Simpler Rulebook to Streamline Stock Exchange Operations

The Securities and Exchange Board of India (SEBI) is set to overhaul the regulatory framework governing stock exchanges and clearing corporations to enhance the ease of doing business. By eliminating obsolete provisions and consolidating multiple circulars, the regulator aims to create a more efficient, principles-based ecosystem for Market Infrastructure Institutions (MIIs).

Consolidation of Master Circulars and Regulatory Frameworks

In a significant move toward reducing regulatory clutter, SEBI has proposed the issuance of a single master circular for stock exchanges. This new framework will consolidate provisions that currently exist separately for stock exchanges and commodity derivatives exchanges.

To further streamline operations, the regulator plans to introduce separate master circulars specifically for clearing corporations. Additionally, a consolidated circular will be issued to cover common information technology (IT) requirements applicable to all MIIs. This restructuring is designed to reduce duplication and provide greater operational flexibility for market participants.

Reducing Compliance Burdens and Redundant Reporting

A major pillar of this proposal is the reduction of the compliance workload for exchanges. SEBI intends to discontinue several periodic reports that have become redundant in the current market environment. Instead of mandatory submissions to the regulator, some reporting responsibilities may be shifted to the oversight of internal MII committees.

Other targeted regulatory reliefs include:

  • Direct Market Access (DMA): Discontinuing the requirement for registration of investment managers providing DMA services.
  • Smart Order Routing (SOR): Introducing a single-window registration framework for brokers offering SOR services.
  • Option Contracts: Discontinuing the Close-to-Money (CTM) norms for option contracts.
  • Audit Frameworks: A comprehensive review of the existing system and network audit framework for MIIs to ensure it remains relevant.

Enhancing Investor Protection and Commodity Market Norms

Beyond operational efficiency, the consultation paper touches upon critical aspects of market integrity and investor protection. SEBI has suggested a review of disclosure requirements for investors participating in commodity derivatives and a revisit of the norms governing position limits across various products.

The regulator is also looking to simplify the administrative side of investor safety by proposing the merger of Investor Protection Funds (IPF) for the equity and commodity segments. Furthermore, updates are expected for the client code modification framework to ensure smoother transaction management.

This proposal marks the fourth review in a series of initiatives by SEBI to modernize the regulatory landscape. The regulator has invited public comments on these proposals, which will be accepted until July 13, 2026, before a final framework is notified.

Key Takeaways

  • Regulatory Consolidation: SEBI aims to merge multiple circulars into single master frameworks for stock exchanges and IT requirements to reduce complexity.
  • Operational Efficiency: The proposal seeks to eliminate redundant periodic reporting and simplify registration processes for DMA and SOR services.
  • Structural Reforms: Significant changes are proposed for the commodity derivatives segment, including merging investor protection funds and reviewing position limits.