SEBI Proposes Simplified Rulebook to Streamline Stock Exchange Operations

The Securities and Exchange Board of India (SEBI) has unveiled a major proposal to overhaul the regulatory framework governing stock exchanges and clearing corporations. This move is part of a strategic initiative to enhance the ease of doing business within India's capital markets by removing obsolete provisions and reducing compliance burdens.

Consolidating Frameworks for Market Infrastructure Institutions

To eliminate confusion caused by a fragmented regulatory landscape, SEBI plans to consolidate multiple circulars into a streamlined set of master circulars. Under the new proposal, the regulator aims to issue a single master circular for stock exchanges that integrates provisions for both equity and commodity derivatives exchanges.

Additionally, the regulator intends to issue separate master circulars for clearing corporations. A third, consolidated circular will be introduced to cover common information technology (IT) requirements applicable to all Market Infrastructure Institutions (MIIs). This consolidation is expected to reduce duplication and provide much-needed operational flexibility to market participants.

Reducing Compliance and Reporting Burdens

A significant portion of the proposal focuses on cutting "red tape" by discontinuing redundant reporting requirements. SEBI intends to reduce the frequency and volume of periodic reports submitted to the regulator by either discontinuing those that are no longer relevant or shifting their oversight to internal MII committees.

The regulator is also looking at specific operational changes, such as:

  • 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.
  • Audits: Reviewing the existing system and network audit framework for MIIs to ensure it remains contemporary and effective.

Strengthening Investor Protection and Commodity Norms

Beyond administrative streamlining, SEBI is revisiting several market-specific norms to ensure they remain efficient and principles-based. This includes a review of disclosure requirements for investors in the commodity derivatives segment and a re-evaluation of the existing position limits across various products.

Furthermore, the regulator has proposed updating the client code modification framework to prevent errors and streamline corrections. In a move toward greater structural efficiency, SEBI has also suggested merging the Investor Protection Funds (IPF) currently maintained for the equity and commodity segments.

This proposal marks the fourth in a series of reviews undertaken by SEBI to modernize the regulation of MIIs. 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

  • Structural Simplification: SEBI aims to consolidate various rules into single master circulars for exchanges, clearing corporations, and IT requirements to reduce regulatory clutter.
  • Operational Efficiency: The proposal seeks to reduce compliance costs by discontinuing redundant periodic reports and streamlining registration processes for DMA and SOR services.
  • Market Integration: Key reforms include merging investor protection funds for equity and commodity segments and revising position limits and disclosure norms.