SEBI's new ease-of-business push: What may change for stock exchanges, brokers

The Securities and Exchange Board of India (SEBI) has initiated a wide-ranging review of regulations that govern stock exchanges, clearing corporations, and commodity derivatives exchanges. This initiative forms part of a broader effort to enhance the ease of doing business within the Indian securities market and reduce the compliance burden faced by market participants. According to a recent press release, this regulatory review aligns with SEBI’s long-term vision of achieving “optimal regulation,” focusing on simplifying existing regulatory requirements, eliminating redundant or obsolete provisions, and rationalizing the frequency and nature of required reporting by market infrastructure institutions (MIIs).

The review encompasses the master circulars for both stock exchanges and clearing corporations, along with those related to commodity derivatives. SEBI emphasized that the process involves extensive consultations with various stakeholders across the financial ecosystem. The primary objectives of the review include streamlining the content of these regulations, delegating certain responsibilities, reducing the number of periodic filings, and incorporating suggestions received from industry participants.

In support of this initiative, SEBI has already published four consultation papers aimed at improving the ease of conducting business for stock exchanges. Consultations regarding exchange administration, trading mechanisms at stock exchanges, and exchange-traded derivatives have been concluded, while ongoing discussions continue around the consultation paper focused on trading software and technology frameworks. A significant proposal under consideration is the consolidation of all relevant provisions into a single master circular for exchanges, combining those applicable to both stock exchanges and commodity derivatives exchanges.

Additionally, SEBI has proposed distinct master circulars for clearing corporations and a unified circular addressing common information technology provisions applicable to MIIs. These changes are anticipated to cut the size of the master circular for exchanges by approximately half. The regulator has also considered discontinuing several reports currently submitted to SEBI, shifting oversight responsibilities to internal committees within MIIs or handling them via public disclosures. Other potential reforms include abolishing the need for registration of investment managers offering direct market access, implementing a one-stop registration system for brokers providing smart order routing services, reassessing the audit framework for systems and networks used by MIIs, and relaxing guidelines surrounding liquidity enhancement schemes.

SEBI has also floated the idea of withdrawing close-to-money (CTM) norms for options in goods, revising the framework for modifying client codes, clarifying who holds the responsibility for monitoring position limits, and integrating investor protection funds across equity and commodity segments. The revised master circular for exchanges will be finalized following a thorough evaluation of stakeholder input. Comments on the consultation paper concerning trading software and technology for exchanges can be submitted until July 13, 2026, after which SEBI is expected to finalize its stance on the proposed modifications.

The move comes amid growing calls for regulatory reform in India’s financial sector, driven by the need to make the country more competitive globally and attract greater foreign investment. By streamlining regulations and reducing bureaucratic hurdles, SEBI aims to foster a more dynamic and efficient securities market. This initiative reflects a broader trend seen in other jurisdictions where regulators are increasingly looking to modernize their frameworks to keep pace with technological advancements and evolving market practices.

Industry players have expressed mixed reactions to the proposed changes. While some welcome the potential reduction in compliance costs and increased flexibility, others caution against hasty implementation without adequate safeguards. Brokers, exchanges, and clearing corporations are expected to provide detailed feedback during the consultation period, which will play a crucial role in shaping the final outcome of SEBI’s regulatory overhaul. As the deadline approaches for submitting responses, the financial community remains closely watching how these developments might reshape the landscape of India’s securities market moving forward.