SEBI's Broker Reforms: Easier Compliance, Tougher Consolidation

The Securities and Exchange Board of India (SEBI) has proposed significant reforms aimed at improving ease of doing business for stock and commodity exchanges. These measures are poised to streamline daily compliance for brokers and grant exchanges more operational freedom, potentially intensifying market competition. A key change involves shifting the reporting of bulk and block deal disclosures from the Unique Client Code (UCC) level to the PAN level, automating a compliance task for brokers and allowing direct dissemination by exchanges.

Broader consolidation of trading rules across equities, derivatives, and commodities is anticipated to reduce overall compliance efforts by eliminating repetitive tasks and overlaps. However, a notable impact on smaller intermediaries is expected from the proposed increase in the minimum net-worth requirement for brokers offering margin trading facilities, raising it from ₹3 crore to ₹5 crore. This adjustment may prompt consolidation or strategic realignments among mid-sized brokers.

Furthermore, SEBI's proposal to integrate market making into a principle-based Liquidity Enhancement Scheme (LES) grants exchanges significant discretion to design incentives. This shift empowers exchanges to compete more aggressively for liquidity, especially in emerging market segments. While these reforms aim to level the playing field and encourage competition, they also signal a move towards greater regulatory autonomy for exchanges.