The Securities and Exchange Board of India (SEBI) is considering a more flexible compliance system for stockbrokers, with regulatory requirements linked to their size, client base and use of technology. Chairman Tuhin Kanta Pandey announced the proposal on Saturday, outlining the regulator’s broader plans to strengthen market infrastructure, improve liquidity and encourage responsible innovation.
Speaking at the 16th ANMI International Capital Market Convention in Mumbai, Pandey said SEBI wants to ensure that regulatory obligations reflect the operational realities and risks faced by different market participants.
“For stockbrokers, we are exploring graded compliance. It would reflect your scale, your client exposure, and your reliance on technology,” Pandey said, emphasising that supervision needs to be balanced against operational risks.
The proposed approach forms part of SEBI’s wider efforts to simplify compliance requirements while strengthening safeguards across India’s capital markets.
SEBI Considers Risk-Based Compliance For Stockbrokers
The graded framework under consideration would take into account differences in the scale and operations of stockbroking firms. Rather than applying an identical compliance burden across the board, the proposed system would reflect factors such as client exposure and dependence on technological systems.
The announcement signals the regulator’s intention to align oversight with the risks posed by different intermediaries. However, SEBI has yet to detail how the framework would be structured or when it could be implemented.
Pandey also highlighted reforms aimed at depository participants, which play a key role in maintaining investors’ securities holdings.
“We are reworking the rules for depository participants for simpler compliance and stronger defences against fraud,” Pandey said.
Corporate Bond Market To Get A Liquidity Boost
SEBI is also looking to improve trading activity in the corporate debt market, with a particular focus on transactions in the secondary market. Stronger liquidity could help investors buy and sell corporate bonds more efficiently.
“A market-making framework is being developed to lift secondary trading in corporate bonds,” he revealed.
The proposed framework is intended to support market participation beyond equities and strengthen the infrastructure needed for a more active corporate bond market.
Pandey also outlined plans to modernise the way debt securities are traded and settled, including through the potential introduction of tokenised corporate bonds.
“In the next phase of Demat 2.0, tokenised corporate bonds will trade in the secondary market, bringing better liquidity, lower settlement risk, and faster access to funds,” he said.
SEBI Explores AI Sandbox For Financial Innovation
Alongside changes to market infrastructure, SEBI is examining ways to let financial market participants experiment with emerging technologies in a controlled environment.
“We are exploring an AI sandbox where new tools can be tested safely. While innovators gain regulatory certainty, we gain the right safeguards,” he noted.
An AI sandbox could provide a structured setting for testing new tools while allowing the regulator to assess potential risks before wider adoption. The proposal reflects SEBI’s stated aim of enabling innovation without compromising market stability.
Pandey also stressed that the growing reliance on digital systems makes cybersecurity and operational preparedness essential for market intermediaries.
“So please treat cybersecurity as a business priority, not an IT expense. Test your systems. Plan for failure,” Pandey warned.
His remarks underline the importance of preparing for cyberattacks, technology failures and other disruptions that could affect market operations.
Short Selling And Securities Lending Rules Under Review
SEBI is examining other trading mechanisms as part of its efforts to improve liquidity and ensure efficient price discovery across financial instruments.
“We are reviewing short selling and securities lending and borrowing to improve liquidity and price discovery,” Pandey concluded.
These mechanisms form part of the broader market structure and can influence trading activity and the availability of securities for market participants. Any changes to the existing framework would need to balance market efficiency with appropriate safeguards.
Summing up the regulator’s priorities, Pandey said: “Our roadmap has four parts: simpler rules, deeper markets, responsible technology, and wider access,” he reiterated.
