SEBI Proposes Major Overhaul to Simplify Stock Exchange Regulations

The Securities and Exchange Board of India (SEBI) has unveiled a comprehensive proposal to revamp the regulatory framework for stock exchanges and clearing corporations. This strategic move aims to enhance the ease of doing business by stripping away obsolete provisions and streamlining compliance processes for market infrastructure institutions (MIIs).

Consolidating Rules into Unified Master Circulars

A central pillar of SEBI’s proposal is the drastic reduction of regulatory clutter through the consolidation of multiple circulars. Currently, market participants must navigate a complex web of individual instructions. To fix this, SEBI intends to issue a single, unified master circular for stock exchanges that merges provisions for both equity and commodity derivatives exchanges.

Furthermore, the regulator plans to issue separate master circulars specifically for clearing corporations. There will also be a dedicated consolidated circular covering common information technology (IT) requirements applicable to all MIIs. This move is designed to create a principles-based framework that provides clearer guidance and reduces administrative duplication.

Reducing Compliance Burdens and Redundancy

In a significant push toward operational efficiency, SEBI has proposed a reduction in the volume of periodic reports that exchanges and clearing corporations must submit. The regulator intends to discontinue reports that have become redundant due to evolving market dynamics or shift the oversight of certain reports to internal MII committees.

Other specific regulatory rollbacks include:

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

Strengthening Investor Protection and Market Oversight

While the focus is on simplification, SEBI is also revisiting several core market mechanisms to ensure they remain relevant. The consultation paper suggests reviewing disclosure requirements for investors in the commodity derivatives segment and revisiting the existing norms that govern position limits across various products.

Additionally, the regulator aims to modernize the client code modification framework and improve the efficiency of investor protection. One notable proposal includes merging the existing investor protection funds for the equity and commodity segments into a more streamlined structure.

This initiative marks the fourth review in a series of efforts by SEBI to optimize the regulatory landscape for 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

  • Regulatory Simplification: SEBI plans to replace multiple, fragmented circulars with unified master circulars for exchanges, clearing corporations, and IT requirements.
  • Operational Efficiency: The proposal seeks to reduce the compliance load by discontinuing redundant periodic reports and simplifying registration for DMA and SOR services.
  • Structural Reforms: Key changes include merging investor protection funds for equity and commodity segments and reviewing position limits and disclosure norms.