SEBI Has Proposed Changes To Existing Margin Trading Facility Rules

SEBI has prepared a detailed revision proposal for the Margin Trading Facility (MTF) framework, radically transforming the manner in which brokers offer leveraged trading. This proposal is expected to enhance risk management and allow brokers greater flexibility in acquiring funds and operating MTFs.

What Changes Are SEBI Proposing To Margin Trading Rules?

A major proposal is to increase the minimum net-worth requirement of brokers who are offering MTF from ₹3 crore to ₹5 crore. SEBI feels that brokers engaged in providing leverage-based products should be financially strong.

The regulator also came up with an idea of permitting brokers who are working as Limited Liability Partnerships (LLPs) to provide margin trading facilities.

SEBI also wants to increase the pool of capital for brokers. Besides the traditional funding modes, brokers may be allowed to obtain funds through Non-Convertible Debentures (NCDs) and other debt instruments. This will enable them to have a better access to the capital needed to fund client positions.

How Will The New Rules Make MTF Operations Easier?

SEBI has proposed several operational relaxations. If a stock funded under MTF moves out of the eligible Group I category, shifts to the Trade-for-Trade segment or faces trading restrictions, brokers may get a 30-day rebalancing window to comply with regulations instead of facing immediate issues.

The regulator has also suggested allowing fungibility between a client's normal trading ledger and MTF ledger. This means unencumbered funds and securities could be used more efficiently across accounts.

Further, it wants all exchanges to adopt a common "Rights and Obligations" document to create a uniform experience for brokers and investors. Reporting requirements may also become simpler, with MTF disclosures allowed on a T+1 basis.

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For investors, these proposals do not immediately change margin trading rules. This is merely a proposal, and the regulator has asked for comments on its draft by 9 July 2026.

If the proposal moves forward, it is quite likely that the MTF marketplace will be not only more resilient but also capable of helping brokers become capital-efficient and gaining a higher degree of funding ​‍‌flexibility.

Sources:

Moneycontrol