SEBI Clears Path for Industry: Mega Consultation Seeks Input to Streamline Settlement & Risk Rules for Clearing Corps

SEBI Clears Path for Industry: Mega Consultation Seeks Input to Streamline Settlement & Risk Rules for Clearing Corps​

SEBI has released a comprehensive consultation paper detailing proposed modifications to regulatory norms governing Stock Exchanges and Clearing Corporations (CCs). The document aims to significantly ease the operational requirements of industry players, reduce compliance burdens, and enhance the overall ease of doing business across the financial sector. This move marks the final installment in a series of reviews targeting governance structures for market infrastructure.

The consultation focuses on simplifying Chapter 3 (Settlement) and Chapter 4 (Comprehensive Risk Management) of the Master Circular for Stock Exchanges and Clearing Corporations (MSECC). It also reviews provisions within the Master Circular for Commodity Derivatives Segment (MCCD), seeking views from the public, market participants, and financial institutions.

Standardizing Risk and Simplifying Pay-in Shortfall Norms​

One of the most critical changes proposed relates to the management of pay-in shortfalls by trading members. Currently, severity is assessed against the Base Minimum Capital (BMC). The proposal introduces a shift toward standardized benchmarks for settlements in cases of shortfalls across single instances or multiple occasions within three months.

The new approach suggests benchmarking settlement shortages either to 1% of the Base Net-worth or Rs 5 lacs, whichever is lower. Furthermore, the responsibility for managing these penalties has been shifted from Stock Exchanges to Clearing Corporations (CCs). This change addresses a regulatory oversight anomaly where CCs monitor shortfalls but exchanges levy penalties.

Enhancing Operational Efficiency and Reducing Redundancies​

SEBI is proposing broad structural shifts designed to rationalize periodic filings and delegate operational responsibilities to the CCs. Several provisions previously mandating specific reporting or actions from both Exchanges and Clearing Corporations are being modified or removed.

For instance, the requirement for trading members (TM/CMs) to report marginal collections has been proposed for discontinuation. This is intended to eliminate redundancies, given that TMs and CMs already report disaggregated collateral information daily to the CCs. The mandatory reporting of penalties collected by exchanges will also be rationalized, with CCs being designated as the primary entity for such disclosure.

Delegating Responsibilities and Rationalizing Financial Oversight​

The consultation paper highlights several instances where process ownership is being centralized or delegated. Regarding settlement in case of unscheduled holidays, the proposal mandates that Clearing Corporations formulate a Standard Operating Procedure (SOP) in consultation with exchanges and Depositories. This coordinated approach is intended to ensure timely completion of all scheduled events during unforeseen disruptions.

Additionally, SEBI seeks feedback on discontinuing the requirement for Clearing Corporations to submit quarterly Net-worth certificates to SEBI. This change stems from existing regulatory mandates which already require an annual net worth certification by the statutory auditor, thereby mitigating compliance duplication. The paper also proposes to discontinue the periodic submission of PFMIs reports by FMs to SEBI, given that such performance is continuously reviewed internally by the Governing Board.

Obsolete Provisions and Market Development Moves​

The review process has identified numerous instances where existing norms are obsolete due to the maturity of market cycles. Changes proposed include deleting requirements related to the previous T+2 settlement cycle, as fully implemented T+1 rolling settlements have made these procedures unnecessary.

Other changes reflect market evolution. The requirement for Stock Exchanges having an average daily turnover less than ₹ 1 crore to maintain a specific BMC has been proposed for discontinuation. Similarly, the operational risk management framework for the dedicated debt segment has been moved to be prepared by CCs in consultation with SEBI, reflecting the evolving structure of the market.

Public Consultation Timeline and Next Steps​

SEBI has invited comments on these extensive modifications across both MSECC and MCCD. Industry participants are urged to review the details provided in the consultation paper and provide specific feedback through the designated online web-based form. The deadline for submitting all comments, including those related to draft circulars annexed as Annexure A and B, is August 27, 2026.

The comprehensive nature of these proposed changes underscores SEBI's commitment to a streamlined, efficient, and globally competitive financial market infrastructure.