India's securities market regulator, the Securities and Exchange Board of India (Sebi), is set to undertake a significant simplification of the rulebook governing the nation's stock exchanges within the next few months. The move aims to enhance clarity and reduce the compliance burden for market infrastructure institutions.
Consolidation and Simplification of Rules
Sebi Chairman Tuhin Kanta Pandey stated on Monday that the regulator plans to consolidate, simplify, and rationalize the master circular for stock exchanges chapter by chapter. He made this announcement while addressing an event organized by the Confederation of Indian Industries (CII) Southern Region in Chennai.
The master circular, which dictates the administration and operations of Indian stock exchanges, has grown complex over the years. It has accumulated numerous amendments, circulars, and segment-specific directions across both equity and commodity derivatives markets. The proposed overhaul is part of Sebi's broader agenda of "optimum regulation," which seeks to create leaner, more effective rules that protect investors and market integrity while easing compliance.
"While making changes in regulations, we will consult widely with all stakeholders for a balanced outcome," Pandey assured.
Key Proposals from the Consultation Paper
The plan follows a consultation paper released in October, where Sebi proposed a comprehensive revamp of the regulatory framework for stock exchanges and clearing corporations. The public feedback period for this paper concluded on 29 October.
The key proposals include:
- Merging the separate master circulars for equity and commodity-derivatives exchanges into a single, unified document.
- Issuing a distinct master circular specifically for clearing corporations.
- Introducing a chapter-wise restructuring of all existing circulars issued up to July 2025.
- Removing outdated provisions like exchange-code requirements.
- Establishing a three-year lookback period for claims against defaulting brokers.
- Consolidating the separate Investor Protection Funds (IPFs) for equity and commodity derivatives into a single, unified fund for each exchange.
These measures are designed to remove redundant rules, lower compliance costs, and consolidate various directives into a more user-friendly framework.
Broader Regulatory Push and Other Priorities
Beyond the stock exchange rulebook, Pandey highlighted several other priority areas for Sebi to deepen India's capital markets. A major focus is on strengthening the corporate bond market, which has expanded to nearly ₹55 trillion, accounting for about 60% of bank credit.
To attract more retail investors to bonds, Sebi has already reduced the minimum face value and expanded electronic book-building platforms to include REITs and InvITs. "A comprehensive awareness programme on bonds is needed to bring retail investors to this market," Pandey emphasized.
Other key initiatives include:
- Developing the commodities market, both agricultural and non-agricultural.
- Launching an end-to-end digital registration framework for Foreign Portfolio Investors (FPIs). This new, fully paperless system aims to slash approval timelines from "months to days," significantly easing onboarding for overseas capital.
- Simplifying Know-Your-Customer (KYC) requirements for Non-Resident Indians (NRIs), addressing a long-standing demand from global intermediaries to reduce operational friction.
This regulatory refresh forms part of a wider push by Sebi, which has also recently undertaken comprehensive reviews of mutual fund regulations, stockbroker norms, the LODR framework, and settlement rules. The overarching goal is to revamp outdated regulations and promote a more dynamic and accessible financial ecosystem in India.
