SEBI Initiates Massive Regulatory Overhaul to Boost Ease of Doing Business in Securities Markets

SEBI Initiates Massive Regulatory Overhaul to Boost Ease of Doing Business in Securities Markets​

SEBI has launched an ambitious review aimed at radically simplifying compliance burdens across the securities ecosystem. In a move signaling a commitment to 'optimal regulation,' the market regulator is undertaking a comprehensive review of the Master Circular for Stock Exchanges and Clearing Corporations, alongside the Master Circular for Commodity Derivatives. This initiative is designed to reduce operational costs and ease processes for all participants in the financial markets.

The regulatory body's objective centers on streamlining complexity. Through this consultative process, SEBI intends to remove redundant and obsolete requirements from existing circulars. The focus also includes delegating appropriate responsibilities and rationalizing routine periodic filings, marking a significant push toward market efficiency.

Scope of the Regulatory Simplification Drive​

To facilitate smoother operations for Exchanges and Clearing Corporations, SEBI has issued four key Consultation Papers. These papers cover crucial aspects of the securities industry infrastructure.

The completed consultations include measures relating to Administration of Exchanges and Trading at Stock Exchanges. Another completed paper concerns Exchange Traded Derivatives. The final ongoing consultation paper deals specifically with Trading Software and Technology for Exchanges.

These consultative steps indicate SEBI's detailed approach towards identifying bottlenecks in market functioning. The continuous engagement with stakeholders is intended to ensure the resulting regulations are practical and effective.

Key Proposals Driving Market Efficiency​

The proposed changes introduce several structural reforms, aiming for a cohesive and streamlined operational environment. A major proposal involves creating a single Master Circular for Exchanges. This consolidation would integrate provisions related to both Stock Exchanges and Commodity Derivatives Exchanges into one document.

To further simplify the system, SEBI plans to issue separate Master Circulars specifically for Clearing Corporations and for Market Infrastructure Institutions (MIIs). These MII circulars will cover common information technology-related provisions.

Several ground-level changes are also on the table. The regulator is considering discontinuing various routine reports that currently need to be submitted to SEBI, potentially delegating these oversight functions to Committees of MIIs or making them available for website disclosure.

Operational Streamlining and Industry Reforms​

The review spans operational norms across several segments. Key proposals include discontining the registration of Investment Managers with SEBI when they provide Direct Market Access facility. Additionally, a single-window registration process is being introduced for brokers who plan to offer Smart Order Routing capability.

In terms of market risk management and protection, SEBI has proposed reviewing the System and Network Audit Framework for MIIs. The proposal also touches upon discontinuing Close To Money (CTM) norms specifically for Option in Goods trading. Furthermore, there is a suggestion to merge the Investor Protection Fund covering both equity and commodity segments.

The Master Circular for Exchanges will be issued after thoroughly reviewing public comments received on the initial consultation papers. Similarly, the Master Circular for Clearing Corporations requires further consultation before its release. Public interest is currently sought specifically on the fourth paper concerning Trading Software and Technology for Exchanges, with comments due by July 13, 2026.