SEBI's Trading Framework Revamp Targets Simplified Compliance

The Securities Exchange Board of India (SEBI) announced on Friday that it had implemented new reforms for the improvement of trading practices for all stock exchange users. The purpose of this consultation paper is to create a single framework consolidating all trade rules associated with the various types of financial instruments (equity, commodity, etc.), as well as to eliminate duplication and provide an easier path for compliance and allow for an improved experience for all stock market participants.

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Unified Framework Across Segments

The various overlapping provisions that exist today in relation to the trading operations, price bands/circuit breakers, bulk/block deals, call auctions and Liquidity Enhancement Schemes for margin trade customer codes, Permanent Account Number (PAN) requirements, and all stock exchange trading hours will be consolidated into one unified framework for trading operations for the equity and commodity markets. The rules governing Clearing Corporation will be removed from the operational provisions of the Master Circular and presented as separate master circulars to eliminate duplication.

Margin Trading and Liquidity Reforms

SEBI has proposed to increase the threshold of the net-worth required of broker-dealers for margin trading services while also aligning their reporting timeframes with other financial reporting cycles, and eliminating unnecessary, repetitive "due diligence" checks. Existing cash market-making provisions will be merged into a principle-based Liquidity Enhancement Scheme that will apply across both the Equity and Derivative markets, as well as the Commodity Market, along with providing Exchanges greater flexibility in the development of their trading platforms and higher incentive caps for new trading platforms.

Operational Streamlining Measures

Bulk / block deal reporting will shift to PAN-level reporting to provide additional transparency to all market participants. In addition, the currently disorganised format of IPO Processes, trading operations, price bands, circuit breakers, etc., has all moved to tabular formats and now no longer contains multiple examples. All Exchanges will have the same trading hours. Therefore, all Equity, Derivative, Commodity, Currency, Request for Quotes (RFQ), Exchange for Reversing (EGR), and Social Stock Exchange (SSX) segments will have identical trading hours.

Client Code and Penalty Liberalisation

Modernisation of Client Code Modification Rules (CCMR) to eliminate penalties for genuine errors, allow use of multiple UCCs linked to a PAN, facilitate account transfers between family members that are Foreign Portfolio Investors (FPIs), and replace quarterly reporting requirements with monthly waivers. Each of the penalty structures is harmonised across the exchange and the Clearing Corporation (CC).