Consultation paper on netting and circular on closing auctions to be out soon: SEBI chair Tuhin Kanta Pandey

Consultation paper on netting and circular on closing auctions to be out soon: SEBI chair Tuhin Kanta Pandey

• SEBI to release consultation paper on netting for greater market efficiency
• Netting framework to simplify FPI operations and enhance portfolio rebalancing
• SWAGAT-FI initiative to simplify FPI registration and market access

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SEBI will soon release a consultation paper on netting as early as today, SEBI Chair Tuhin Kanta Pandey said, signalling continued reforms aimed at improving market efficiency and ease of participation for foreign investors.

Speaking at Samvad 2026, Pandey said the proposed netting framework would allow greater operational efficiency for market participants, particularly foreign portfolio investors (FPIs), and is being finalised following discussions with the banking system.

“Netting is an area we are looking at very closely. The consultation paper will be out very soon to allow them to net in some respects and improve operational efficiency,” he said. It could be released as early as today.

In November 2025, the regulator said that it is examining the feasibility of allowing netting of trades by foreign portfolio investors (FPIs), a move that could make portfolio rebalancing smoother and more cost-efficient, according to people aware of the discussions. The idea involves permitting FPIs to offset buy and sell positions in different securities, instead of settling each leg separately. This could be particularly useful when global funds rebalance portfolios or indices by buying one stock and selling another.

Auction reforms under review

Pandey also said the government is closely examining auction processes, including the closing auction session, and indicated that a related circular could be issued soon to improve transparency and efficiency. In August 2025, SEBI released a consultation paper for a proposed framework to replace India's current VWAP system for setting closing stock prices, aiming for greater stability, transparency, and alignment with global practices. In August 2025, Securities and Exchange Board of India (SEBI) has issued a revised consultation paper to seek public comments on introducing a Closing Auction Session (CAS) in the equity cash segment and to allow passive mutual funds to borrow overnight borrowing for liquidity needs arising from CAS trades. The proposal followed significant feedback and global alignment considerations.

Ease of investment for FII/FPIs

Talking about measures being instated by the regulator to encourage FIIs, Pandey said FPI flows are largely driven by global factors such as returns across markets, earnings growth, currency movements and geopolitical developments, and should be seen in a broader, cyclical context.

FPIs currently have close to $900 billion invested in Indian markets, he said, adding that outflows of around $18 billion over a period do not alter the long-term attractiveness of the market.

Focus on market depth, reduced frictions

He said the regulators regulatory focus remains on deepening and diversifying Indian financial markets, particularly the debt and corporate bond segments, to reduce pro-cyclicality and give investors flexibility to shift between asset classes.

At the same time, authorities are working to reduce structural frictions, especially in the FPI registration process, through faster timelines, digitisation and better coordination among regulators.

Pandey highlighted the SWAGAT-FI initiative, which aims to bring greater certainty to registration periods, reduce paperwork and provide more flexibility to investors. In September 2025, SEBI approved the introduction of SWAGAT-FI – Single Window Automatic and Generalised Access for Trusted Foreign Investors to facilitate easier investment access for objectively identified and verifiably low-risk foreign investors.

The framework is designed to simplify onboarding, reduce compliance burdens, and make market access easier for low-risk foreign investors such as sovereign wealth funds, pension funds, multilateral organizations, central banks, regulated retail funds, and insurance companies. In the simpler terms it will act like a diplomatic passport to invest more easily in Indian markets.