Image Source: The Economic Times
India’s capital markets regulator, the Securities and Exchange Board of India (SEBI), is preparing a sweeping set of reforms aimed at strengthening market integrity, improving investor protection, and enhancing transparency across trading segments. SEBI Chairperson Tuhin Kanta Pandey outlined three key initiatives on August 21, 2025: extending the tenure and maturity of equity derivatives contracts, deepening cash market volumes, and creating a regulated platform for pre-IPO company disclosures.
These reforms come amid rising retail participation, global scrutiny of speculative trading, and growing demand for structured access to unlisted securities.
1. Equity Derivatives: Tenure Extension and Maturity Reform
SEBI is exploring ways to increase the tenure and maturity of equity derivatives contracts to reduce speculative churn and align with global standards
The regulator has already limited the number of contract expiries and increased lot sizes to curb excessive retail exposure and high-frequency trading volatility
Effective August 28, 2025, the expiry day for all index and stock derivatives will shift from Thursday to Tuesday, including NIFTY, BANKNIFTY, FINNIFTY, MIDCPNIFTY, and single-stock contracts
SEBI’s Secondary Market Advisory Committee is reviewing intraday position limits and exposure caps to prevent manipulation and protect retail investors3
2. Cash Market Deepening: Boosting Liquidity and Participation
SEBI aims to enhance cash market volumes by incentivizing long-term participation and reducing reliance on derivatives
Measures under consideration include lowering Securities Transaction Tax (STT), easing margin requirements, and expanding product diversity
India’s cash market turnover rose 38.3 percent year-on-year to ₹300 lakh crore in FY25, but growth has slowed compared to previous years
SEBI is working with exchanges to improve order execution, reduce latency, and attract institutional flows into the cash segment
3. Pre-IPO Platform: Regulating the Grey Market and Enhancing Transparency
SEBI will collaborate with the Ministry of Corporate Affairs (MCA) and stock exchanges to build a regulated platform for information on pre-IPO companies
The initiative aims to curb grey market activity and speculative pricing in unlisted shares, which often mislead retail investors8
The proposed platform will allow structured trading of shares during the three-day window between IPO allotment and listing, replacing informal curb trading
Investors will gain access to verified disclosures, buy/sell quantities, and indicative pricing, improving decision-making and reducing risk
Strategic Implications and Industry Response
Market participants have welcomed the reforms as timely and necessary, especially in light of recent volatility and regulatory action against manipulative trading strategies
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The regulated pre-IPO platform is expected to boost investor confidence and attract foreign interest in India’s booming startup ecosystem
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Derivatives reforms may impact trading volumes in the short term but are seen as essential for long-term market stability
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Cash market deepening could shift retail focus toward value investing and reduce systemic risk from leveraged positions
Forward Outlook
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SEBI’s reform agenda reflects a broader shift toward sustainable market development, balancing innovation with investor protection
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The regulator is expected to release detailed guidelines and implementation timelines over the next quarter
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Stakeholders across brokerages, exchanges, and asset managers are preparing for operational adjustments and compliance upgrades
Sources: The Hindu Business Line, Reuters, Outlook Business, CNBC-TV18, Financial Express, Business Standard.
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