Capital market regulator Sebi has issued a consultation paper seeking views on its plan to revamp the stock broker regulations, with the aim to ease compliance burden and harmonize the rules with the Companies Act, 2013. For the first time, the definition of 'Algorithmic Trading' is being proposed to be included in the Stock Brokers Regulations, 1992.
Shares of Angel One, Motilal Oswal, Nuvama Wealth, IIFL Capital and BSE are sharply higher in anticipation that the consultation paper's recommendations could lead to lower compliance costs for the broking community, among other regulatory relaxations. The Nifty Capital Market index is higher by more than 1.5 percent with all constituents in the green in early trade.
Sebi has proposed that in order to permit stock brokers to get access of the Negotiated Dealing System–Order Matching (NDS-OM) system, for trading in Government securities and to undertake securities-related activities in GIFT-IFSC, under a separate unit. This platform has been traditionally reserved for banks and primary dealers.
The current regulations do not have any definition of ‘Algorithmic Trading’. In order to cover such trades by stock brokers, Sebi has proposed to include the definition of algorithmic trading in Sebi Stock Brokers Regulations, 1992.
The regulation will also look to define 'Execution Only Platform' as digital or online platform which facilitate subscription, redemption and switch transactions in direct plans of mutual funds.
The paper will also define the practice of proprietary trading to bring clarity in the demarcation of own trading and trading on behalf of clients by stock brokers. Sebi proposes to define 'proprietary trading' as trading in any segment of the stock exchange, in its own account by a stock broker.
The proposals in the Sebi consultation paper include aligning sub-regulations with each other and with other intermediary regulations to ensure uniformity, as well as omit regulations which are redundant.
As part of the consultation process, stakeholders can submit feedback on the draft regulations until September 3, 2025, via Sebi's online portal or email.
According to the regulator, the proposed overhaul is aimed at balancing ease of business, reduce cost, and simplify regulations along with robust investor protection, to grow the securities market.
The focus area of the consultation paper is to simplify the language of the regulations and remove ambiguity, if any, and remove inconsistency to bring parity across sub-regulations. Sebi said it will aim to omit regulations that are redundant, and incorporate changes to reflect market practices and regulatory environment.
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