In an effort to reduce regulations, eliminate duplication, and lessen the expense of compliance for market players, market regulator Sebi on Friday recommended a reform of the trading-related framework at stock exchanges. The recommendations are a part of Sebi’s larger effort to make it easier to conduct business on stock exchanges, particularly those that deal in commodity derivatives.
In its consultation paper, Sebi proposed creating 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.
Sebi suggested combining bulk and block deal disclosures and moving distribution to the customer PAN level rather than the UCC level in order to increase transparency and lessen the need for brokers to manually submit reports.
The regulator has recommended removing some redundant or out-of-date operational examples and presenting market-wide circuit breaker regulations, dynamic price band flexing, IPO pricing bands, and call auction procedures in tabular form. Additionally, the regulator has suggested rationalizing MTF regulations, such as increasing brokers’ minimum net worth requirements from Rs 3 crore to Rs 5 crore or more, as stipulated by exchanges.
Provisions pertaining to short-selling and securities lending and borrowing (SLB) will be made clearer and integrated into the main framework. Daily disclosures will be required, and the roles of exchanges and CCs will be clearly defined. The unified circular will also include disclosures related to commodities, such as open interest information, hedger delivery intent, and risk disclosures by listed entities.
Additionally, Sebi suggests revising the secondary market’s UPI-based trading regulations with blocked quantities and moving settlement-related details to the CC master circular. Sebi has until January 30 to solicit public feedback on the plans.
