SEBI Announced New Regulations Today, Holds on Tightening Futures and Options Rules
SEBI Chair, Madhabi Puri Buch
India’s chief securities regulator, the Securities and Exchange Board of India (SEBI), held a board meeting today (Sept 30) to announce a series of new regulations, while deciding to delay implementing much-anticipated rules on the futures and options market. The new reforms are below:
New Asset Class for High Networth Individuals SEBI has approved a new asset class, called “Investment Strategies,” aimed at high-risk investors. The asset class was created to bring regulation to unauthorized investment schemes that promise unreasonable returns at very high risks. Investors must put a minimum of ₹10 lakh ($11,931.56) across strategies within the same asset management company. The new regulated product will function similarly to a systematic investment plan, and will not allow leverage and limit exposure to derivatives.
Offshore Derivative Instruments (ODI) Disclosures SEBI has tightened regulations on ODI disclosures, requiring Foreign Portfolio Investors that offer such products to report relevant information about their subscribers/investors and portfolio-level information to depositories.
T+0 Settlement & Block Deals SEBI will extend T+0 settlement to the top 500 stocks, enabling brokers to offer a faster trading cycle. An additional block deal window will operate from 8:45 to 9:00 a.m., complementing the existing T+1 system. T+0 denotes same-day trading (where T is the trade date and 0 indicates the number of days to clear the trade). Block deals refer to the simultaneous execution of a large number of trades (exceeding a specific threshold) at a pre-negotiated price, primarily used by institutional investors.
Faster Rights Issues SEBI has cut the rights issue timeline to 23 days, down from an average of 317, making it faster than the preferential allotment process. Stock exchanges will now handle approvals, streamlining the process for issuers. A monitoring agency will oversee all rights issues, regardless of size. A rights issue is a way for companies to raise capital by offering existing shareholders the right to purchase additional shares at a discounted price, typically in proportion to their current holdings.
Disclosures Listed companies now have three hours, instead of 30 minutes, to disclose board meeting outcomes after trading hours. They also have 72 hours to disclose litigation claims, provided the information is stored in a digital database.
Trading Modes Starting February 2025, Qualified Stock Brokers (QSBs) must offer either a UPI-based blocked amount system for secondary market trades or a 3-in-1 trading account option, giving clients more flexibility and improving their investment experience. QSBs refer to brokerage firms that allow customers to execute trades, offer investment advice, and/or help clients manage their money. UPI-based refers to the use of the Unified Payments Interface (UPI), a real-time payment system developed by the National Payments Corporation of India (NPCI). UPI allows users to link multiple bank accounts to a single mobile application and make instant payments between bank accounts using a smartphone. This type of account integrates three services: a bank account, a demat account (for holding securities in electronic form), and a trading account (for buying/selling securities). The 3-in-1 setup makes it seamless to transfer money between accounts for trades, manage securities, and track investments all in one place.
Insider Trading SEBI expanded insider trading regulations to cover individuals indirectly associated with the market, such as household members or distant relatives of connected persons.
Mutual Funds Lite SEBI introduced MF Lite, a simplified framework for passively managed mutual funds. The framework lowers barriers for new entrants by easing requirements on net worth, track record, and profitability while reducing the compliance burden for trustees.
What’s Next for Futures and Options SEBI Chairperson Madhabi Puri Buch’s tax hikes and promises for reform have already led to a decline from February’s peak trading volume of $6 trillion — still, the futures and options sector has grown 40-fold since 2019, a cause of stress for regulators as retail investors have lost $210 billion in the last three years on speculative trades. The expected reforms include higher margin requirements, stricter position limits that prevent traders from taking outsized bets, enhanced risk disclosures, and increasing the eligibility criteria for retail traders, which could include providing financial literacy through certification.
