SEBI Invites Public Feedback on Proposal to Extend Direct Market Access and Streamline Technology Regulations

The Securities and Exchange Board of India (SEBI) has released a consultation paper proposing significant changes to the regulatory framework governing technology and trading access across stock exchanges and other Market Infrastructure Institutions (MIIs). The proposals form part of the regulator’s ongoing efforts to simplify regulations and improve operational efficiency under its ease-of-doing-business initiative.

Proposal to Expand Direct Market Access

One of the key proposals under consideration is the extension of the Direct Market Access (DMA) facility to all categories of investors, including retail participants. At present, DMA is generally available to institutional investors, enabling them to place orders directly into exchange trading systems through broker infrastructure while operating within prescribed risk management controls.

SEBI has noted that advancements in trading technology and market infrastructure may support wider access to DMA facilities. Accordingly, the regulator has proposed removing the existing restriction that limits DMA access primarily to institutional clients, subject to appropriate operational safeguards and risk management mechanisms.

Changes Proposed for Commodity Derivatives Segment

The consultation paper also recommends aligning DMA provisions applicable to exchange-traded commodity derivatives with those applicable in other market segments. As part of this harmonization exercise, SEBI has proposed removing references that currently restrict DMA usage to specific investor categories, including Foreign Portfolio Investors (FPIs), thereby allowing exchanges to determine eligible investor categories from time to time.

The proposed change is intended to create a more consistent regulatory framework across various trading segments while enhancing flexibility in the deployment of DMA facilities.

Relaxation in Investment Manager Requirement

SEBI has further proposed the removal of the existing requirement that investment managers placing DMA orders on behalf of clients must be registered with the regulator. However, the proposal retains the contractual accountability framework under which clients remain responsible for the actions carried out by their appointed investment managers.