SEBI Launches Comprehensive Regulatory Review for Market Infrastructure Institutions
The Securities and Exchange Board of India (SEBI) has announced a major overhaul of its regulatory framework governing stock exchanges, clearing corporations, and commodity derivatives exchanges. The initiative aims to promote ease of doing business and reduce the compliance burden in the securities market, according to a press release issued on Monday.
The review aligns with SEBI's vision of 'optimal regulation' and seeks to simplify regulatory requirements, eliminate obsolete provisions, and rationalize reporting obligations for market infrastructure institutions (MIIs). The exercise involves a detailed examination of the Master Circular for Stock Exchanges and Clearing Corporations as well as the Master Circular for Commodity Derivatives.
Consultative Process and Key Objectives
SEBI is undertaking the review through a consultative process involving stakeholders from across the market ecosystem. The key objectives include simplification of regulatory content, removal of redundancies, delegation of responsibilities, rationalisation of periodic filings, and incorporation of stakeholder suggestions.
As part of the initiative, SEBI has already released four consultation papers focused on measures to improve ease of doing business for stock exchanges. Consultations on the administration of exchanges, trading at stock exchanges, and exchange-traded derivatives have been completed, while the consultation on trading software and technology for exchanges remains open for public comments until July 13, 2026.
Proposed Consolidation of Master Circulars
Among the major proposals under consideration is the creation of a single consolidated Master Circular for exchanges by merging provisions related to stock exchanges and commodity derivatives exchanges. SEBI has also proposed issuing a separate Master Circular for clearing corporations and a separate consolidated circular covering common information technology-related provisions for MIIs.
The regulator estimates that these changes could reduce the size of the Master Circular for exchanges by nearly 50 per cent. Other measures include discontinuation of several reports currently submitted to SEBI, with oversight responsibilities proposed to be shifted to MII committees or addressed through public disclosures.
Specific Proposals to Streamline Operations
SEBI has proposed ending the requirement for registration of investment managers to provide Direct Market Access facilities and introducing a single-window registration mechanism for brokers offering Smart Order Routing services. Additional proposals include a review of the system and network audit framework for MIIs, withdrawal of Close to Money norms for options in goods, clearer allocation of responsibilities for monitoring position limits, revision of the client code modification framework, liberalised norms for liquidity enhancement schemes, and merger of investor protection funds across equity and commodity segments.
According to SEBI, the revised Master Circular for exchanges will be issued after considering public feedback on the consultation papers. The regulator encourages market participants and the public to submit comments on the fourth consultation paper on trading software and technology for exchanges by the July 13, 2026 deadline.
