Sebi to Overhaul Margin Trading Rules
Sebi aims to streamline risk management, boost investment flexibility.
The Securities and Exchange Board of India (Sebi) is set to revamp the margin trading funding (MTF) framework to enhance risk management at clearing corporations, according to its 2024-25 annual report. The initiative is part of a broader effort to modernize financial regulations, ensuring they align with the evolving needs of India’s capital markets.
The MTF system allows investors to purchase shares by paying only a portion of the cost upfront, with the balance covered through margins in cash or collateralized shares. Sebi’s comprehensive review will reassess the current margining rules and the eligibility of securities under MTF, aiming to strengthen risk controls while maintaining market accessibility.
Beyond MTF, Sebi is exploring reforms in the angel fund ecosystem to simplify fundraising, investment conditions, and operational processes. These changes seek to bolster support for startups by facilitating easier capital flow from angel investors, a critical lifeline for early-stage ventures.
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Sebi also plans to reclassify Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as hybrid instruments, responding to stakeholder feedback and global practices. This follows a decade of market evolution, with REITs and InvITs exhibiting equity-like features, prompting a need to refine their regulatory framework.
In parallel, Sebi is reviewing mutual fund regulations to ensure they remain adaptable and effective. Feedback from the mutual fund industry, including the Association of Mutual Funds in India (AMFI), has prompted an examination of restrictions on asset management companies (AMCs). Additionally, Sebi aims to expand permissible investment strategies under Specialised Investment Funds (SIFs), which bridge the gap between mutual funds and portfolio management services (PMS). Currently, SIFs allow limited strategies across equity, debt, and hybrid categories, requiring a minimum investment of Rs 10 lakh.
These reforms reflect Sebi’s commitment to fostering a dynamic and investor-friendly market environment while addressing risk management and regulatory gaps. As the review progresses, stakeholders anticipate a more streamlined and robust financial ecosystem, poised to support India’s growing investment landscape.
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