SEBI board meet may centre around brokerages rules

Sebi Board Meeting to Discuss Reforms for Equity Brokerages and More

The Securities and Exchange Board of India (Sebi) board meeting on December 17 will be the 212th, and it will be a crucial session for several reforms, with most of them linked to equity brokerages.

Modernising Market Mechanisms

The Sebi board is likely to discuss several key reforms to modernize market mechanisms, including:

• Improvement to 1992 stock broker regulations (SBR) to define 'algorithmic trading' and align regulations with modern technology and global market practices.
• Modernization of the stock lending and borrowing (SLB) mechanism to make it efficient and accessible, and to deepen market liquidity and create a robust structure for short-selling.

Market experts believe that the modernization of SLB transactions, which are currently exchange-based, will align with global practices, which are typically over-the-counter (OTC) trades.

“At present there are not too many long-short strategy in India. Such strategies often comes with greater scrutiny on firms, and is good for market integrity, as fund managers look to profit from downward price movements,”

~ Investment Strategist, Mutual Fund

Structural Reforms

The Sebi board will also look at sweeping changes to mutual fund fee rules with changes to the Total Expense Ratio (TER) and updated limits on brokerage charges.

• Changes to mutual fund fee rules with updated limits on brokerage charges, which may have a significant impact on the stocks of asset managers, brokerages, and distributors.
• Restrictions on post-retirement assignments for Sebi senior officials, as recommended by a high-level six-member team (HLC) on internal conflict-of-interests at Sebi.

Market experts believe that the reforms may have a significant impact on the future of the MF industry, with some arguing that regulatory interventions in commercial operations may be considered as high risk.

“Regulatory interventions in commercial operations may be considered as high risk for the future of MF industry,”

~ Chairman, Brokerage-Distributor

Other Key Reforms

• Review of the tenure of derivative maturities and the impact on the market, including the weekly options expiry provision.
• Implementation of a two-year restriction on post-retirement assignments for Sebi senior officials.
• Steps on unregulated digital gold products to protect investors, as recommended by the HLC.

The Sebi board will also review a report from the HLC on internal conflict-of-interests at Sebi and consider implementing the recommendations, including greater transparency.