Whalesbook
Unifying Securities Laws
India's Parliament has introduced the Securities Markets Code Bill, 2025, marking a major step to unify and modernize the country's securities market rules. The bill aims to merge three core laws: the Securities Contracts Regulation Act of 1956, the SEBI Act of 1992, and the Depositories Act of 1996, into one comprehensive law. Key goals include making markets more efficient, lowering compliance costs for businesses, and improving investor protections within the complex financial system. However, the bill faces significant risks in how it will be put into practice, with challenges that could limit its expected advantages.
Key Reforms and Market Impact
The Securities Markets Code Bill, 2025, aims to establish a "one market, one rulebook" system, a goal first mentioned in the 2021-22 Union Budget. This consolidation intends to reduce the chances for companies to exploit regulatory differences, make compliance easier, and improve the integrity of India's capital markets. These markets have grown substantially, with the Nifty 50 index accounting for about 44% of total market value as of February 2026. Key changes include an eight-year limit for investigations, shifting minor offenses from criminal to civil penalties, and a clearer definition of market abuse. Supporters believe these changes will update digital trading rules and strengthen investor safeguards as more individual investors enter the market. The bill proposes expanding SEBI's board to as many as 15 members and introduces stricter rules on conflicts of interest. It also formalizes public input for new regulations and creates a 'regulatory sandbox' to encourage innovation.
Economic Climate and Past Reforms
The bill's introduction and review in late 2025 and early 2026 come as India's economy shows strong growth, with projections between 7.2% and 7.7% for fiscal year 2025-26. Even with global issues like trade disputes and geopolitical tensions, India's internal demand has stayed strong. Still, worries remain about how events such as the Iran war could affect oil prices and how U.S. tariffs might impact growth in FY27. India's financial sector has a history of major reforms, including initiatives based on the Narasimham Committee reports and the Insolvency and Bankruptcy Code. While these aimed for efficiency, they also faced delays and structural issues during implementation. Experts note that while this new code is a vital step, its success will largely depend on how well it's put into practice and if regulators have the necessary skills. A similar move towards consolidating rules is happening in other areas, like the simplification of labor laws.
Criticism and Concerns
While the Securities Markets Code Bill, 2025, has positive goals, critics highlight major structural issues. They point out SEBI's combined legislative, executive, and judicial powers, which raise questions about fair governance. The bill gives SEBI the power to define new 'market abuse' offenses with criminal penalties, leading to worries about giving regulators too much legislative authority. Also, exchanges, which are for-profit organizations overseeing their own members, face a conflict of interest. This requires strict oversight to ensure regulations aren't weakened for business profits. The Jane Street case in 2025, where SEBI issued a significant interim order, showed potential unclear rules and the need for SEBI to have better tools to assess large market players. Some observers also feel the bill doesn't offer enough new ideas for instruments or trading methods, like listing companies without public offers or platforms for unlisted firms. This could slow market development. Weaknesses in investor protection and unclear wording might weaken the bill's aims, requiring further changes.
Looking Ahead
As the bill moves through parliamentary review, attention will turn to its actual implementation and enforcement. Experts expect the Securities Markets Code to create a more unified regulatory system. However, its success will depend on how well it can adapt to changing market conditions and whether SEBI and other bodies have the ability to handle the increased responsibilities. Current economic reforms and a stable political climate should help maintain investor confidence, but resolving issues like trade disputes with the U.S. and ensuring tax clarity will be vital. The road forward requires ensuring the code's goals of efficiency, openness, and investor safety are met without creating new risks or slowing down market innovation.