India’s capital markets regulator is considering a significant change that could broaden access to direct trading infrastructure beyond institutional participants. The Securities and Exchange Board of India (SEBI) has proposed expanding Direct Market Access (DMA) to all categories of investors, potentially opening the door for retail traders to place orders directly into exchange systems. The proposal was outlined in a consultation paper released on Monday, where SEBI highlighted that advances in technology and risk management frameworks have made it possible to consider DMA access for a wider pool of market participants.
DMA is a trading facility that enables investors to send buy and sell orders directly to stock exchanges without routing them through a broker’s dealing desk. The mechanism is designed to reduce execution delays and provide greater control over trade placement.
At present, the facility is largely restricted to institutional investors. However, SEBI believes the evolving market structure may support broader participation while maintaining appropriate safeguards.
In its consultation paper, the regulator stated, “It is understood that exchanges have the flexibility to extend DMA facility to other client categories; however, as suggested by MIIs, for further clarity, the line ‘Currently this facility is available for institutional clients’ is proposed to be removed.”
The proposal is not limited to equity markets. SEBI is also examining the possibility of extending DMA access in exchange-traded commodity derivatives (ETCDs) to additional investor categories.
The move builds on a regulatory change introduced in May 2023, when registered foreign portfolio investors (FPIs) were permitted to use DMA for participation in ETCDs. Market infrastructure institutions (MIIs) have since sought greater alignment in DMA rules across market segments.
Addressing the proposal, SEBI said, “It has been proposed for exchanges to specify from time to time the categories of investors to whom the DMA facility can be extended for ETCDs, as is the present requirement for other segments.”
Growing Adoption Of DMA On NSE
Recent trading data indicates rising interest in DMA among market participants. In the National Stock Exchange’s cash market segment, DMA activity increased notably during May, with its market share climbing by 91 basis points month-on-month to 4.7 per cent, the highest level recorded in nine months.
The increase came alongside stronger participation from foreign investors, suggesting growing demand for direct trading mechanisms.
Meanwhile, other trading channels experienced mild shifts in market share. Colocation-based trading accounted for 43.4 per cent of activity, while mobile trading continued its upward trajectory. Mobile-based transactions reached a five-year high of 22.9 per cent in FY27 through May 2026, underscoring the growing influence of digital trading platforms.
What The Proposal Could Mean For Investors
If implemented, SEBI’s proposal could represent a notable step toward improving market accessibility and trading efficiency. By widening DMA eligibility, the regulator may enable more investors to benefit from faster order execution and enhanced market participation, while continuing to enforce category-specific risk controls.
The consultation process will now allow stakeholders to provide feedback before any final regulatory changes are considered.
