The Securities and Exchange Board of India (Sebi) is set to revamp its approach to broker net worth calculations by introducing a risk-based framework. This move, announced in April, aims to enhance market stability by linking broker net worth to both client funds and the size of the client base.
Currently, broker net worth is tied to 10% of the average daily client cash balance. However, Sebi's proposed changes will see net worth computed as an aggregate of client funds and client base size. This shift is part of a broader effort to ensure more stable and efficient market operations.
In addition to broker net worth reforms, Sebi is working to improve price discovery during IPOs and relisted securities through the pre-open call auction mechanism. This initiative is expected to stabilize market openings, as India saw 366 IPOs in FY26, raising approximately ₹1.9 lakh crore.
“The proposed changes are aimed at ensuring more stable and efficient market openings.”
Pandey, Sebi Chief
Sebi is also considering easing compliance requirements for research analysts, including rationalizing call recording obligations during institutional interactions. This is aimed at streamlining processes and reducing the regulatory burden on analysts.
On the debt market front, Sebi is collaborating with the Reserve Bank of India to introduce derivatives on corporate bond indices. A working group is also developing a market-making framework to boost liquidity in the corporate bond market.
Background
These regulatory changes come at a time when the Indian financial markets are experiencing significant growth and transformation. The introduction of a risk-based approach to broker net worth is expected to align regulatory practices with global standards, promoting investor confidence.
Looking ahead, market participants will be closely watching the implementation of these reforms and their impact on market dynamics. Sebi's ongoing efforts to streamline regulations and enhance market stability are crucial for sustaining growth in India's financial markets.
