The Securities and Exchange Board of India (SEBI) has proposed a major overhaul of the regulatory framework governing exchange-traded derivatives, aiming to simplify compliance requirements for stock exchanges while maintaining existing risk management safeguards. The proposals were issued through a consultation paper released on Thursday.

In its draft reforms, SEBI suggested consolidating, restructuring and pruning several master circulars that currently govern equity, currency, interest rate and commodity derivatives. The regulator said the move is intended to reduce duplication, streamline processes and improve operational efficiency for market infrastructure institutions.

Among the key changes under consideration is the removal of the “Close-to-the-Money” (CTM) option series in commodity derivatives. SEBI noted that the structure adds unnecessary complexity and uncertainty for traders, and pointed out that major global commodity exchanges typically operate without such a framework, relying instead on in-the-money and out-of-the-money options.

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The regulator has also proposed reducing the mandatory frequency of Product Advisory Committee meetings for non-agricultural commodities to once a year, citing limited agenda requirements and logistical challenges in convening members. Additional proposals include shifting daily derivatives disclosure requirements from newspapers to exchange websites, granting exchanges greater flexibility in setting position limits, and removing outdated norms related to broker certification and capital requirements.

SEBI emphasised that the objective of the proposed changes is to simplify regulatory processes and eliminate redundant compliance requirements without weakening investor protection or risk control mechanisms in the derivatives market. The regulator reiterated that the core prudential safeguards governing trading activity will remain unchanged.The consultation process is now open for public feedback, with stakeholders invited to submit their comments on the proposals until June 4, after which SEBI will review responses before finalising any regulatory amendments.

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