Securities and Exchange Board of India (SEBI) has come up with four new guidelines and directives in the past two days. These directives can bring in many changes in stock trading, and investments. These SEBI guidelines are for different investors, market participants, stock exchanges, and other institutions and others for the benefit of the market as a whole. Let’s understand each of these guidelines in depth.
Infrastructural and operational Development
SEBI has proposed certain guidelines to boost the operational efficiencies of the IT system and MIIs.
- To make the Market Infrastructure Institutions (MIIs) future-ready, advanced frameworks need to be created. This aims to estimate capacity needs, trends leveraging, historical data, business changes, growth in transactions, and more. SEBI asked MIIs to prepare a methodology for the same which needs to be submitted to the Standing Committee on Technology (SCOT) for approval and other governing bodies as well and then within three months submitted to SEBI.
- MIIs must maintain a minimum of 1.5 times of anticipated peak load derived from the past 180 trading days’ data and other key factors to ensure smooth service during volume peaks.
- SEBI has also mandated MIIs to deploy systems, which are automated for performance monitoring on a real-time basis. These systems have to be so prepared that they produce alerts if defined levels are surpassed to make sure issues are detected at the earliest and resolved.
- MIIs are also required to carry on stress tests every three months to evaluate performance during heavy-volume transactions and volume peaks.
- SEBI has also asked clearing corporations, and stock exchanges to act swiftly if more than 75% installed capacity of the IT components is in use. Apart from the IT guidelines for stock exchanges, the depositories have to report if the same happens for 15 days in a go as per.
Simplifying NRI trading
The next set of guidelines proposed by SEBI is to ease trading for NRIs in the exchange-traded derivatives segment and improve trading efficiencies. For this SEBI has proposed the use of the Permanent Account Number (PAN) of the NRI which can be used for monitoring their position limits and thus clearing members need not to be notified and obtain CP code from them. Currently, NRIs trading in derivatives require a custodial participant (CP) code and NOC is required to switch from one clearing member to another. This makes trading difficult for NRIs in this segment. With the use of PAN, NRI position limits can be monitored and they can trade in derivatives without CP codes, which can increase the operational efficiency as well. SEBI has asked for public comments on this until 31 December 2024.
ICEX’s Exit Granted by SEBI
SEBI allowed the Indian Commodity Exchange (ICEX) to leave the exchange space on Tuesday. The recognition was nullified by SEBI two years back, and now ICEX has met all the regulatory requirements and thus got the approval to exit the space.
ICEX’s valuation report has been reviewed by SEBI and it has given it a nod to exit the exchange space as it fulfills all the requirements. The report discloses all the known liabilities and ICEX assured SEBI that there are no other third-party liabilities as well which aren’t disclosed. They also assured SEBI that if any financial claims are raised against them in the future, they will be taking full responsibility for the same.
SEBI has directed ICEX to comply with the tax obligations and alter its name, as it is not allowed to use “Stock Exchange“. Even though it is exiting the exchange space, SEBI has directed it to maintain the entire database of the earlier years.
SEBI’s Pan-India Survey
Coming to the final guideline or update from SEBI, released yesterday by SEBI officials, the watchdog will conduct a pan-India survey on risk awareness, factors that can be worked upon to bring more people into the capital market, bridging gaps in the market ecosystem, and more.
These surveys and awareness programs are mainly directed at new investors and young people who are coming to the market. Since markets have flared in recent years, most of the new investors haven’t seen the downturns and thus, it is important to make them aware of the same so that they can manage their risks efficiently without fearing the market slowdowns. SEBI is working with AMFI, stock exchanges, and clearing houses to make the awareness program a success in the upcoming days.
Wrapping up
These SEBI guidelines and directives aim at creating a capital market a better place for all investors, removing operational inefficacies, and boosting trading and investments across segments.
Source: CNBC TV18
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