SEBI Proposes Overhaul Of Exchange-Traded Derivatives Rules, Seeks Simplified and Unified Structure

On 14 May, the Securities and Exchange Board of India (SEBI) issued a consultation paper proposing amendments to the regulatory framework for exchange-traded derivatives, aimed at simplifying compliance, removing redundant provisions, and improving ease of doing business.

Among the key proposals, SEBI has suggested deleting provisions on “Close to the Money” (CTM) option series and related norms for “Options in Goods” in commodity derivatives. The master circular currently requires stock exchanges to provide CTM strike prices for such contracts, but SEBI noted that exchanges are not offering them, rendering the requirement redundant.

The regulator has also proposed revising Product Advisory Committee (PAC) norms to allow stock exchanges to seek exemptions from prescribed composition requirements where certain stakeholders are unavailable for a commodity. It further proposed reducing the minimum frequency of PAC meetings for non-agricultural commodities to at least once a year.

SEBI has additionally proposed allowing exchanges to advance expiry dates for physically settled commodity derivative contracts when the physical market at the notified basis centre is closed on expiry day due to unforeseen events such as festivals, strikes, or adverse weather, subject to prior approval of the Managing Director of the exchange.

It also proposed permitting stock exchanges to outsource monitoring of position limits to clearing corporations through formal arrangements clearly defining roles, responsibilities, and arm's length commercial terms.

Further, SEBI suggested removing certain compliance requirements it views as obsolete or duplicative, including minimum base capital requirements for trading members, certification examinations, and newspaper publication requirements for derivatives transactions by exchanges. It also proposed dispensing with separate submission of Product Success Framework evaluation reports where such disclosures are already available on exchange websites.

Another key proposal involves restructuring the framework by merging provisions governing equity, currency, and interest rate derivatives into unified sections to improve regulatory consistency.

Public comments on the consultation paper are invited until 4 June 2026.