India Markets
SEBI Rules & Regulations
How India's market regulator protects investors and what every market participant needs to know.
SEBI (Securities and Exchange Board of India) is the regulatory authority for India's securities market, established in 1988 and given statutory powers in 1992. Its mandate is to protect investor interests, develop and regulate the securities market, and promote fair market practices. Understanding key SEBI regulations helps investors make informed decisions and avoid violations.
SEBI's Core Investor Protection Rules
SEBI has enacted numerous rules designed to safeguard retail investor interests against fraud, manipulation, and unfair practices.
- KYC (Know Your Customer): All investors must complete KYC before trading — Aadhaar-based e-KYC simplified this significantly
- T+1 Settlement: Shares and funds settle the next trading day, reducing counterparty risk
- Margin requirements: SEBI mandates specific margin collection to reduce excessive leverage
- Insider trading prohibition: Trading on material non-public information is illegal with severe penalties
- SEBI SCORES: Online complaint redressal system for investor grievances
F&O Rules: Peak Margin and Position Limits
SEBI overhauled F&O margin requirements in 2021, significantly increasing the capital required to trade derivatives.
- Peak margin rule: Brokers must collect margin at the intraday peak exposure, not just at EOD
- This effectively reduced leverage available for intraday F&O trading by 50-70%
- Position limits: Individual and institutional position limits prevent excessive concentration
- Options seller margin: Selling options now requires SPAN + Exposure margin upfront
Recent SEBI Reforms (2023-2025)
SEBI has been active in tightening regulations, especially around F&O participation and mutual fund disclosures.
- F&O lot size increase (2024): NIFTY lot size increased to 25 from 50, contract value raised to ~₹15 lakh minimum
- Weekly options restrictions: Only Nifty 50 and Sensex weekly expiries permitted — reduced speculative instruments
- MF expense ratio caps: SEBI regularly reviews and reduces total expense ratio limits
- Direct plan mandate: All AMCs must offer direct plans with lower costs
- Skin in the game: Fund managers required to invest minimum % of salary in their own funds
Key Takeaways
- ✓SEBI regulates all market participants: exchanges, brokers, AMCs, depositories
- ✓Complete KYC before investing — it is mandatory and protects you
- ✓Report grievances through SEBI SCORES portal for faster resolution
- ✓F&O margin rules were significantly tightened in 2021 — understand requirements before trading derivatives
- ✓SEBI's recent reforms aim to protect retail investors from speculative losses in options
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