SEBI Proposes New Trade Settlement Path to Lower Offshore Fund Costs

India’s capital markets regulator has proposed a significant settlement reform aimed at improving ease of doing business for foreign portfolio investors (FPIs).  

The Securities and Exchange Board of India (SEBI) has suggested allowing eligible large FPIs to settle only their net trade positions instead of settling each transaction separately. 

Settlement Reform to Lower Funding Costs 

Currently, FPIs must fund and settle every individual buy and sell trade, even when positions are offset within the same trading session. SEBI’s proposal would permit netting of intraday trades, meaning only the final net obligation would require settlement.  

This change is expected to materially reduce funding requirements, operational complexity and transaction costs for foreign investors with high trading volumes. 

Context of Foreign Outflows and Market Competitiveness 

The proposal comes at a time when foreign flows into Indian equities have faced pressure due to global trade tensions, higher US tariffs, stretched valuations and softer corporate earnings.  

By easing settlement mechanics, SEBI aims to improve market depth, enhance liquidity and make Indian markets more competitive relative to other global destinations. 

Implementation and Broader Reform Agenda 

SEBI has issued the proposal through a consultation paper, inviting feedback from market participants.  

The net settlement mechanism forms part of a broader regulatory push to simplify market access, accelerate investor onboarding and modernise post-trade infrastructure to attract long-term overseas capital. 

Read More: SEBI Chief Flags Disclosure Gaps in IPO Documents, Seeks Greater Transparency! 

Conclusion 

If implemented, net settlement for large FPIs could meaningfully lower frictional costs and strengthen India’s appeal to global investors at a time when competition for foreign capital is intensifying. 

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.  

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.