In a continued effort to promote ease of doing business in India’s financial markets, the Securities and Exchange Board of India (SEBI) has released a Consultation Paper on Administration of Stock Exchanges, inviting public comments on proposed regulatory simplifications. This move aligns with the Hon’ble Finance Minister’s FY 2023–24 budget announcement, which emphasized reducing compliance costs and streamlining regulations through public consultation.
Objective of the Consultation Paper
SEBI’s primary objective with this paper is to simplify, rationalize, and consolidate the regulatory framework governing Market Infrastructure Institutions (MIIs)—specifically, Stock Exchanges and Clearing Corporations, including those dealing in Commodity Derivatives.
To achieve this, SEBI seeks public feedback on proposed modifications to:
- Chapter 6 of the Master Circular for Stock Exchanges and Clearing Corporations (MSECC) dated December 30, 2024.
- Chapters 13, 14, and 15 of the Master Circular for the Commodity Derivatives Segment (MCD) dated August 4, 2023.
These proposed changes aim to eliminate outdated rules, reduce duplication, and introduce a single, comprehensive regulatory framework that will apply across both equity and commodity exchanges.
Key Proposals in the Paper
1. Removal of Redundant Provisions
One notable change proposed is the removal of the requirement for allotting two-digit exchange codes to each stock exchange—originally required under Paragraph 1 of Chapter 6 of the MSECC.
Rationale:
- These codes were initially introduced to identify the origin of introducing brokers for document processing related to bad delivery or errors in physical share certificates.
- However, with the transition to dematerialized securities, such physical share-related issues no longer exist.
- On review, SEBI noted that these codes are no longer used in any meaningful capacity, making the requirement obsolete.
2. Consolidation of Circulars
SEBI proposes to consolidate the existing master circulars into a single set of comprehensive guidelines for all stock exchanges, including those operating in the commodity derivatives segment.
Benefits:
- Avoids duplication of similar provisions across circulars.
- Provides clarity and uniformity in regulation.
- Reduces compliance overhead for exchanges and market participants.
3. Structural Changes in Approach
The review and consolidation will involve:
- A chapter-wise review of the MSECC circular.
- An entity-wise distinction between guidelines for stock exchanges and clearing corporations.
- Merging existing circulars into a single, simplified document applicable post July 31, 2025.
Why This Matters
These changes mark a significant step in modernizing India’s capital market regulatory environment. As financial markets grow in complexity and scale, SEBI is taking proactive measures to:
- Reduce legacy regulatory burdens.
- Focus on efficiency and digital-first governance.
- Improve the ease of compliance for exchanges and intermediaries.
This consultation paper represents a forward-looking approach to regulation—moving away from rule-heavy legacy frameworks to a more streamlined and principle-based system.
Next Steps
SEBI is inviting comments, suggestions, and feedback from the public and stakeholders on these proposals. Inputs received will be considered before the final circular is issued, ensuring that reforms are inclusive and well-informed.
Conclusion
SEBI’s efforts to simplify the administration of stock and commodity exchanges are in line with global best practices. By phasing out outdated processes and unifying regulatory structures, the regulator is laying the groundwork for a more efficient, transparent, and investor-friendly market ecosystem.
Market participants, legal experts, and industry bodies are encouraged to review the consultation paper and provide their views—helping shape the future of capital market regulation in India.