A key item on the agenda is a proposal to allow Foreign Portfolio Investors (FPIs) to net funds for same-day cash market trades, instead of settling each trade individually.
Under the existing framework, an FPI needs to settle equity cash market trades on a gross basis, funding each purchase transaction independently of any sale transactions, even on the same day.
Sebi has proposed permitting "netting of funds", which would allow FPIs to use proceeds from same-day sales to offset purchase obligations, thereby requiring them to meet only the net payable amount.
The move is aimed at enhancing operational efficiency and reducing the cost of funding for them, especially on index rebalancing days. Also, it is expected to minimise forex-related costs arising from timing mismatches between inflows and outflows.
The proposal follows concerns that the current gross settlement system imposes additional funding requirements on FPIs for at least one extra day, increasing transaction costs.
This will be the fifth board meeting chaired by Sebi Chairman Tuhin Kanta Pandey since he assumed office on March 1, 2025.
Apart from FPI-related reforms, the board will review a series of governance and regulatory proposals. These include a comprehensive overhaul of the "fit and proper person" criteria for market intermediaries, to enhance procedural clarity and fairness, the people familiar with the matter said.
Under this, Sebi is considering a proposal to abolish the reference to initiation of winding-up proceedings as a disqualification in a bid to ensure that only a final winding-up order, and not mere initiation of proceedings, is considered while assessing whether a person is fit and proper.
Also, the regulator is looking to explicitly include the right to a hearing in the rules. Although the practice of giving a reasonable opportunity of being heard already exists, it has been proposed to be clearly stated in the rules to remove any procedural ambiguity.
The board will also take up ease-of-doing business proposals related to real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
Another significant agenda item is the consideration of a report submitted by a high-level panel on conflict of interest and transparency, they added.
The regulator will discuss the panel's report, which proposes comprehensive reforms to bring in transparency by way of greater disclosure and a "zero-tolerance" culture to address conflict of interest of top officials of Sebi.
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Facts Only
Actors: Foreign Portfolio Investors (FPIs), Securities and Exchange Board of India (Sebi), Sebi Chairman Tuhin Kanta Pandey
Events: Proposal for netting of funds for same-day cash market trades, review of governance and regulatory proposals, consideration of a report on conflict of interest and transparency
Timeline: Proposal discussed in a board meeting scheduled for a date after March 1, 2025
Locations: Not specified
Institutions: Securities and Exchange Board of India (Sebi)
Executive Summary
The Securities and Exchange Board of India (Sebi) is considering a proposal to allow Foreign Portfolio Investors (FPIs) to net funds for same-day cash market trades, aiming to enhance operational efficiency and reduce costs. This reform is expected to minimize forex-related costs arising from timing mismatches between inflows and outflows, particularly on index rebalancing days.
The proposal comes amid concerns over the current gross settlement system, which allegedly imposes additional funding requirements on FPIs for at least an extra day, increasing transaction costs. The board meeting to discuss this matter will be the fifth chaired by Sebi Chairman Tuhin Kanta Pandey since March 1, 2025.
In addition to FPI-related reforms, the board will review a series of governance and regulatory proposals. These include a comprehensive overhaul of the "fit and proper person" criteria for market intermediaries, and the inclusion of the right to a hearing in the rules. The board will also take up ease-of-doing business proposals related to real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
Another significant agenda item is the consideration of a report submitted by a high-level panel on conflict of interest and transparency. The report proposes comprehensive reforms to bring in transparency by way of greater disclosure and a "zero-tolerance" culture to address conflict of interest of top officials of Sebi.
Full Take
Steelman: The proposal to net funds for same-day cash market trades is aimed at reducing costs and improving operational efficiency for Foreign Portfolio Investors (FPIs). The current gross settlement system is criticized for imposing additional funding requirements, leading to increased transaction costs.
Patterns detected: ARC-0043 Motte-and-Bailey, ARC-0024 Ambiguity
The proposal presents a clear motive for reducing costs but leaves unstated the potential risks or complexities involved in implementing such a change. The article does not provide specific details on how this netting of funds would work, creating an ambiguous picture that could be open to interpretation.
Root Cause: The proposal can be seen as a response to the challenges faced by FPIs in managing their funds efficiently within the current regulatory framework.
Implications: If successful, the reform could potentially lead to cost savings for FPIs, which could, in turn, lead to increased investment in the Indian market. However, the impact on market stability and potential risks associated with the implementation of the reform remain unclear.
Bridge Questions: How will the netting of funds be implemented? What are the potential risks and benefits of this reform? How might this impact the overall market stability?
Counterstrike Scan: It is unlikely that this article is part of a coordinated influence campaign, as it presents a balanced discussion of the proposal without resorting to emotional exploitation, distortion, or bad faith tactics.
Sentinel — Human
The article shows signs consistent with a human author, as it demonstrates variable sentence lengths, a personal voice, and lacks a strict adherence to known argumentative templates.