SEBI Signals Major Reforms: Easier FPI Entry, New Trading Rules Loom

SEBIEXCHANGE

Overview

SEBI is poised to roll out significant market reforms, including a consultation paper to simplify foreign investor position netting and an impending closing auction session. Chairman Tuhin Kanta Pandey emphasized that FPI flows depend more on returns than regulations, noting India's $900 billion FPI investment. Reforms also target digitizing FPI registration and enhancing the corporate bond market.

Streamlining Foreign Investor Access

Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey indicated that a consultation paper simplifying netting for foreign investors is imminent, potentially releasing as early as today. Netting allows investors to offset buy and sell positions, settling only the net difference rather than individual trades, thereby streamlining the process.

Enhancing Trading Transparency

Pandey also revealed that the introduction of a closing auction session is in its advanced stages. This brief window at the market's close is designed to discover a more stable and transparent closing price through an auction mechanism. This move addresses a long-awaited change for traders seeking improved price discovery.

Addressing FPI Sentiment and Market Depth

Pushing back against notions that regulatory hurdles drive foreign portfolio investor (FPI) outflows, Pandey stated that returns and global economic conditions are the primary determinants of capital flows. India currently holds approximately $900 billion in FPI investments, and recent $18 billion outflows were characterized as cyclical. SEBI is actively working to deepen Indian markets, particularly the corporate bond sector, which has reached ₹56 lakh crore in outstanding value, representing about 60% of bank credit to industry. Efforts include digitizing FPI registration for faster processing and enhancing coordination with the Reserve Bank of India (RBI) through systems like Swagat-FI.

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