SEBI Proposes Major Overhaul Of MTF Framework, Raises Broker Net-Worth Requirement To ₹5 Crore

On Thursday, 18 June, the Securities and Exchange Board of India (SEBI) proposed a comprehensive overhaul of the Margin Trading Facility (MTF) framework, including an increase in the minimum net worth requirement for stock brokers offering MTF from Rs. 3 crore to Rs. 5 crore, as part of measures to strengthen risk management.

In a consultation paper, SEBI said the review stems from rising MTF trading volumes and aims to tighten risk controls while improving ease of doing business.

Among the key proposals, the Authority has suggested permitting uniform collateral eligibility across both cash and MTF transactions, and allowing EPI sell credits to serve as collateral for fresh MTF positions, subject to conditions. It has also proposed a 30-day rebalancing window for brokers when securities funded under MTF or provided as collateral move out of Group I, shift to Trade-for-Trade, or get suspended from trading.

SEBI further proposed allowing brokers to raise MTF funds through Non-Convertible Debentures and other debt instruments, in addition to existing funding sources. It also suggested revising exposure limits by linking them to brokers' borrowings and available net worth, subject to prudential caps.

To ease compliance, the regulator proposed relief for passive breaches of client exposure limits caused by a decline in a broker's overall MTF exposure, provided the broker rectifies such breaches within 30 days and does not create fresh exposure during that period.

Additionally, SEBI proposed simplified disclosure requirements and an auto-pledge mechanism for funded stocks transferred to clients' demat accounts under MTF, without requiring separate client consent.

It also proposed retaining the higher maintenance margin requirement for MTF positions where cash margins fund the pay-in and funded securities serve as collateral.

Public comments on the proposals remain open until 9 July 2026.