Optional UPI block mechanism for Investors in cash segment: Highlights from the much awaited latest SEBI Board meeting

[Meher_Smaran]

SEBI made a slew of changes in its board meeting held on 30th September 2024 like providing an ASBA-like facility for secondary markets, Enhancing the scope of T+0 settlement, Easing the requirements of compliance for IAs and RAs, and Introduction of a new investment product/asset class.

Here are some of the key highlights from the board meeting.

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UPI block mechanism (ASBA-like for secondary markets), or 3-in-1 trading facility for Investors in the secondary market

Starting from February 1st, 2025, Investors will have the option for investors to trade in the secondary market (cash segment) either using the UPI block mechanism (ASBA-like for secondary markets) or 3-in-1 trading facility in addition to the current mode of trading.

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Enhancement of scope of Optional T+0 Settlement Cycle

• The number of scrips eligible for trading under optional T+0 settlement will be increased in a phased manner from the 25 to the top 500 in terms of market capitalization.

• All registered Stock Brokers can offer access to the optional T+0 settlement cycle to their investors. Stock Brokers are free to charge differential brokerage for the same.

• An optional Block Deal window mechanism will be introduced under T+0 settlement cycle as an 8.45 am to 9.00 am session, alongside the existing block windows under the T+1 settlement cycle.

• The optional T+0 settlement in the equity cash market will continue to co-exist with the current T+1 settlement cycle.

• -The earlier proposal to move from optional T+0 settlement to optional instantaneous settlement is not under consideration for now.

SEBI's consultation paper on T+0 and optional Instant Settlement of Trades

Background Back in September 2021, SEBI introduced the concept of T+1 settlement. Following the phased implementation by the exchanges, all the instruments that are traded on the exchanges like stocks, ETFs, bonds, etc. are now settled on T+1 day from January 2023. SEBI’s idea for the introduction of T+0 settlement Following the successful implementation of the T+1 settlement cycle. SEBI has now published a consultation paper for the introduction of T+0 settlement, i.e., instant settlement on …

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Faster Rights Issue with flexibility of allotment to specific investors

Rights Issue to be completed in 23 working days from the date of Issuer’s Board Meeting approving Rights Issue, as against present average timelines of 317 days

SEBI's consultation paper for enabling faster Rights Issue with flexibility of allotment to selective investors

To make Rights Issues a preferred fundraising mode, SEBI undertook a review of the existing Rights Issue process and suggested the following proposals in its consultation paper, which was released on August 20th, 2024. Background: [image] [image] As can be observed from the above data, the amount raised through Rights Issues is lesser than the amount raised through other available modes viz. QIPs and Preferential Allotments. Further, the number of issues through Rights Issues is also substant…

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Introduction of the regulatory framework for a new investment product/asset class

SEBI’s board has approved the introduction of a new investment product under the existing Mutual Fund framework. The new investment product is intended to bridge the gap between Mutual Funds and Portfolio Management Services in terms of flexibility in portfolio construction.

The safeguards for the new product will include; no leverage, no investment in unlisted and unrated instruments beyond those already permitted for Mutual Funds, and derivatives exposure limited to 25% of AUM for purposes other than hedging and rebalancing.

The minimum investment limit for the new product will be Rs. 10 lakh per investor across all investment strategies of the new product in a particular AMC.

What’s the ‘new asset class’ that SEBI just proposed?

SEBI in its latest consultation paper has proposed the introduction of a new asset class/ product category aimed at bridging the gap between Mutual Funds and Portfolio Management Services (PMS) in terms of flexibility in portfolio construction. The proposed New Asset Class seeks to provide investors with a regulated investment product featuring higher risk-taking capabilities and a higher ticket size, aimed at curbing the proliferation of unregistered and unauthorized investment products. Do c…

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Introduction of liberalized Mutual Funds Lite (MF Lite) framework for passively managed schemes of Mutual Funds

As passive funds follow a rule-based investment strategy and there is negligible discretion with AMCs regarding asset allocation and investment objectives, SEBI has announced a relaxed framework “MF Lite framework” for entities desirous of launching only passive Mutual Fund schemes.

Some of the relaxed requirements are related to eligibility criteria for sponsors; including net worth, track record and profitability, responsibility of trustees, approval process, and disclosures. The framework intends to promote ease of entry, encourage new players, reduce compliance requirements, increase penetration, enhance market liquidity, facilitate investment diversification, and foster innovation.

SEBI's consultation paper on Mutual Funds Lite Regulations (MF LITE) for passively managed Mutual Funds Schemes

Context Current regulations don’t differentiate between active and passive funds regarding entry barriers and compliance requirements. Considering the lesser risk inherent in managing passively managed MF schemes, the proposed MF Lite Regulations intend to reduce the compliance requirement, foster innovation, encourage competition, and promote ease of entry for the MFs interested in launching only passive schemes. the proposals related to the introduction of a relaxed regulatory framework in t…

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Investor-Friendly and Uniform Norms for Nomination Facilities in the Indian Securities Market

To enhance investor convenience and introduce uniform standards for nomination facilities across the Indian securities market, SEBI has announced the following:

• Increasing the maximum number of nominees from 3 to 10.
• Allowing nominees to act on behalf of incapacitated investors, with certain risk mitigation checks and balances.
• Simplifying the transmission process to nominees with minimal documentation.
• Streamlining the transmission process for joint holders with minimal documentation.
• Requiring unique identifiers for nominees to be obtained which should be one of: PAN, Passport number, or Aadhaar.

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Review of regulatory framework for Investment Advisers (IAs) and Research Analysts (RAs) to facilitate ease of doing business

Some of key proposals that have been approved by the Board are:

• The minimum qualification requirement is to be reduced to a graduate degree in specified fields.
• There shall be no requirement of experience for registration as IA and RAs.
• IAs/RAs shall be required to have base certifications (NISM Series- XA and XB for IAs, and NISM-Series-XV for RAs) only initially at the time of registration. There shall be no requirement to obtain base certifications afresh subsequently.
• Net-worth requirement shall be replaced with a reduced requirement of deposits, as specified.
• Applicants (individual/partnership firm) engaged in other business activities and employment (other than related to securities and subject to certain conditions), will be allowed to seek registration as Part-time IA/ Part-time RA.

SEBI's consultation paper on regulatory framework for Investment Advisers (IAs) and Research Analysts (RAs)

Addressing the lack of an advisory ecosystem, which is one of the biggest challenges for the Indian markets with only a few hundred RIAs for 10 crore investors, SEBI in its latest consultation paper has proposed many changes that will make it much easier for people to become RIAs. If these proposed changes become final, it’ll go a long way toward increasing the number of individuals wanting to become advisors. Here are some of the key highlights from the consultation paper. Relaxation in elig…

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Some of the other announcements include:

• To facilitate speedier disposal of matters related to certain types of violations
• Facilitating ease of doing business like Introduction of single filing system for listed entities to file relevant reports, documents, etc. on one exchange which will be automatically disseminated at the other exchange(s)
• Pro-rata and pari-passu rights of investors of Alternative Investment Funds
• Proposal to ensure that Offshore Derivative Instruments (ODIs, or erstwhile P-Notes) and segregated portfolios of FPIs are subject to disclosure requirements on par with FPIs
• Amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) to rationalize the scope of expressions ‘connected person’ and ‘immediate relative’
• Facilitating fundraising by corporates by expanding the scope of the Sustainable Finance Framework in the Indian Securities Market
• To facilitate the growth of the Bond market, Ease of Doing Business measures by streamlining compliance for listed Non-Convertible Securities and easing disclosures regarding appointment of DebentureTrustee in the offer document
• Facilitating Ease of Doing Business, amendments to certain SEBI Regulations to substitute the requirement of attestation of certain documents by a Notary Public or Gazetted Officer with self-attestation of such documents
• To facilitate wider access to Informal Guidance from SEBI, review of the SEBI (Informal Guidance) Scheme, 2003

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For more context on the above announcements, you can read the SEBI’s consultation papers to get clarity on the rationale behind these steps.

You can also check the full SEBI press release here:

SEBI | SEBI Board Meeting

TL;DR for F&O traders - The suspense continues

[Private]

@Meher_Smaran

The suspense continues

You should have mentioned this at the top.

[Meher_Smaran]

Reminds me of the don’t miss the end caption in Instagram reels