SEBI Proposes Simpler Rulebook to Streamline Stock Exchange Regulations

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

Consolidating Frameworks for Greater Efficiency

A core component of SEBI's proposal is the significant simplification of the Master Circular for Stock Exchanges and Clearing Corporations. Currently, regulations are scattered across multiple documents, leading to potential confusion and compliance overhead. To address this, SEBI plans to issue a single master circular for stock exchanges by merging provisions related to both stock and commodity derivatives exchanges.

Furthermore, the regulator intends to introduce a separate master circular specifically for clearing corporations. To streamline technological governance, a consolidated circular will be issued to cover common information technology requirements applicable to all MIIs. This move is expected to reduce the complexity of managing diverse sets of technical standards.

Reducing Redundancy and Compliance Burden

In a significant move to reduce administrative friction, SEBI has proposed cutting down the volume of periodic reports submitted to the regulator. Many of these reports have become redundant in the modern market era. SEBI suggests that rather than direct regulatory submission, oversight for certain reports could be shifted to the internal committees of MIIs.

Other targeted deregulatory measures include:

  • Direct Market Access (DMA): Discontinuing the requirement for the 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: Reviewing the existing system and network audit frameworks to ensure they remain relevant to current technological landscapes.

Updates to Commodity Derivatives and Investor Protection

The consultation paper also addresses specific nuances within the commodity derivatives segment. SEBI is looking to review disclosure requirements for investors and revisit the existing norms governing position limits across various products. Additionally, the regulator plans to update the client code modification framework to ensure smoother operational workflows.

In an effort to unify safety nets, SEBI has suggested merging the Investor Protection Funds (IPF) for the equity and commodity segments. This consolidation is intended to create a more robust and streamlined mechanism for protecting market participants.

The regulator has invited public comments on these proposals until July 13, 2026. The final framework will be notified following a thorough review of the feedback received from market participants and stakeholders.

Key Takeaways

  • Regulatory Consolidation: SEBI aims to merge multiple circulars into single master documents for stock exchanges and IT requirements to reduce complexity.
  • Reduced Compliance Load: The proposal includes discontinuing redundant periodic reporting and simplifying registration processes for DMA and SOR services.
  • Unified Safety Nets: The regulator plans to merge investor protection funds for equity and commodity segments to streamline market safeguards.