In an effort to streamline regulations, eliminate duplication, and lessen the expense of compliance for market players, markets regulator Sebi on Friday recommended an overhaul of the trading-related framework at stock exchanges.
Sebi’s Unified Trading Framework Proposal
The plans are a part of Sebi’s larger effort to make it easier to do business on all stock exchanges, including those that deal in commodities derivatives.
Sebi proposed in its consultation paper to create a single, unified framework that would apply to both the equity and commodity segments. This framework would include several overlapping provisions on trading, price bands, circuit breakers, bulk and block deal disclosures, call auction mechanisms, liquidity enhancement schemes, margin trading facility (MTF), unique client code (UCC), PAN requirements, trading hours, and daily price limits.
Separation of Clearing Corporation Provisions
Sebi recommended that in order to prevent regulatory overlap, provisions that are particularly relevant to clearing companies be separated out and transferred into a special master circular.
Sebi suggested combining bulk and block transaction disclosures and moving distribution to the customer PAN level rather than the UCC level in order to increase transparency and lessen brokers’ manual reporting obligations.
Operational Examples and Tabular Presentation
The regulator has recommended removing a number of redundant or out-of-date operational examples and presenting market-wide circuit breaker regulations, dynamic price band flexing, IPO pricing bands, and call auction processes in tabular form.
Rationalising MTF and Market-Making Provisions
Additionally, the regulator has suggested rationalizing MTF regulations, such as increasing the minimum net worth threshold for brokers from Rs 3 crore to Rs 5 crore or more, as stipulated by exchanges. Net-worth and auditor certificate submission deadlines should coincide with financial reporting cycles, and superfluous due diligence terms should be eliminated.
A principle-based Liquidity Enhancement Scheme (LES) framework that now consistently includes stocks, derivatives, and commodities should replace outdated market-making rules for the cash sector.
📊 Sebi Trading Framework Highlights
- Unified Framework: Equity & commodity segments
- MTF: Minimum net worth raised to Rs 5 crore+
- Bulk & Block Deals: Shifted to PAN-level disclosure
- LES: Covers equities, derivatives, and commodities
- Trading Hours: Consolidated for all segments
With higher ceilings for new exchanges or new sectors, the updated framework would provide exchanges more freedom to create schemes, hold board reviews every six months, and provide incentives, according to Sebi’s proposal.
A number of antiquated clauses, such as MOU-based trading, forward contracts in commodities, recommendations for a specialized debt section, negotiated-deal exclusions, and needless reporting requirements, have been suggested for elimination.
Client Code Modifications and SLB Provisions
Equity, derivatives, commodities, currency, RFQ, EGR, and the Social Stock Exchange will all have their trading hours combined into one part.
The Client Code Modification regulations will be loosened to allow for legitimate corrections, permit PAN-linked multiple UCCs for specific client categories, make it simpler to transfer obligations between FPI family accounts, increase the frequency of waivers to once a month, and stop submitting quarterly waiver reports to Sebi. Additionally, clearing companies and exchanges will harmonize their penalties.
The core framework would combine and clarify the regulations pertaining to short-selling and securities lending and borrowing (SLB), requiring daily disclosures and explicitly defining the roles of exchanges and CCs.
Commodity-Specific Disclosures and UPI-Based Trading
The single circular will also include disclosures related to commodities, such as risk disclosures by listed businesses, open interest data, and hedger delivery intent.
Additionally, the Sebi suggests moving settlement-related elements to the CC master circular and revising UPI-based trading regulations with banned quantities in the secondary market. Sebi has until January 30 to receive public feedback on the plans.
⚡ Sebi Trading & Commodity Alerts
- Feedback Deadline: January 30, 2026
- SLB Disclosures: Daily reporting mandated
- Trading Hours: Consolidated across all segments
- Client Codes: Multiple UCCs allowed for PAN
- Market Efficiency: Removal of outdated clauses
Frequently Asked Questions
1. What is Sebi’s proposal’s primary goal?
The primary goals are to streamline trade regulations, eliminate redundancy, and lessen the cost of compliance for market players on commodities and equities exchanges.
2. Which clauses will be combined or streamlined?
A single framework would include provisions pertaining to trade, circuit breakers, price bands, bulk and block transaction disclosures, margin trading, liquidity improvement programs, client codes, trading hours, and more.
3. How will the plan impact brokers?
Indeed. Raising the minimum net worth criterion for brokers and coordinating the application deadlines for auditor and net-worth certifications with financial reporting cycles are two examples of the rationalization of MTF rules.
4. How would the new approach enhance transparency?
Daily SLB disclosures will be required, bulk and block deal disclosures will migrate to the PAN level, and outdated operational examples will be eliminated for more transparent reporting.
5. When will the public be able to provide feedback?
Sebi has until January 30, 2026, to solicit public feedback on the plans.
Conclusion
The goal of Sebi’s planned framework change is to make trading easier, more transparent, and less taxing on participants. The regulator intends to improve efficiency in the equities, derivatives, and commodities markets by amending out-of-date legislation and combining overlapping regulations.
Disclaimer
For informational purposes only; not financial advice. Consult a professional before trading or investing.
