SEBI Looks to Review of MTF Margin Rules to Improve Risk Management

As per reports, the Securities and Exchange Board of India (SEBI) has announced a wide-ranging review of several market frameworks as part of its annual report for 2024-25. These reviews are aimed at strengthening risk management practices, improving ease of doing business, and ensuring that regulatory structures remain relevant in an evolving market environment.

Review of Margin Trading and Risk Frameworks

SEBI is undertaking a comprehensive review of the margining system currently applicable to margin trading funding (MTF). The objective is to streamline the risk management process at clearing corporations and assess whether the framework adequately covers risks. Alongside this, SEBI is also evaluating the eligibility criteria of scrips that can be traded under MTF.

Margin trading allows investors to buy securities without paying the full price up front. Instead, a part of the investment is covered through margin deposits in cash or collateral securities, while the rest is funded by the broker. By reassessing these rules, SEBI intends to strike a balance between investor participation and risk containment.

Focus on Alternative Investment Vehicles

Beyond trading margins, SEBI is also turning its attention to alternative investment avenues. The regulator has proposed changes in the regulatory framework for angel funds, particularly focusing on the fundraising process, investment conditions, and operational aspects to enhance ease of doing business. Angel funds are instrumental in connecting investors with startups that require early-stage capital.

Additionally, SEBI has indicated a review of how Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) are classified. At present, they are considered hybrid instruments, but given their equity-like features and the evolution of the ecosystem, SEBI is considering aligning their classification with global practices.

On the mutual fund front, SEBI is examining existing restrictions for asset management companies (AMCs) after inputs from industry bodies, including the Association of Mutual Funds in India (AMFI). Moreover, the regulator plans to expand the scope of Specialised Investment Funds (SIFs).

These funds were originally introduced to bridge the gap between mutual funds and portfolio management services, but currently, they offer limited strategies. SEBI’s review could allow AMCs to provide investors with a wider set of investment strategies under SIFs, where a minimum investment of ₹10 lakh is required.

Read More: SEBI Integrates Proxy Advisory Recommendations into Investor App; Boosts Market Surveillance!

Conclusion

Through its planned reviews across multiple segments from margin trading to mutual funds and alternative investment frameworks, SEBI aims to create a regulatory ecosystem that encourages innovation, maintains investor confidence, and aligns with global standards. These changes, once implemented, are likely to bring more flexibility to investors while strengthening systemic safeguards.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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