Market regulator Securities and Exchange Board of India (SEBI) has proposed allowing all categories of investors, including retail investors, to access direct market access (DMA) facilities, as part of a broader review of trading technology and information technology regulations applicable to stock exchanges, commodity exchanges and other market infrastructure institutions (MIIs).
The proposal is contained in a
consultation paper issued by the market regulator seeking public comments on a draft circular covering trading software and technology at stock exchanges and a consolidated framework for information technology-related provisions applicable to MIIs.
Under the existing framework, DMA facilities are primarily available to institutional investors. SEBI has proposed removing the reference that limits DMA to institutional clients and allowing brokers to extend the facility to all categories of investors, subject to applicable risk management system (RMS) controls and other regulatory safeguards. The regulator said advances in technology now make it possible to extend the benefits of DMA more widely.
DMA enables orders to be routed electronically to exchange trading systems without manual intervention by the broker, while remaining subject to the broker's risk management and surveillance controls.
SEBI has also proposed widening DMA access in the commodity derivatives segment. At present, a
May 2023 circular permits SEBI-registered foreign portfolio investors (FPIs) to use DMA for exchange-traded commodity derivatives. The consultation paper proposes allowing exchanges to specify additional categories of investors that may access the facility from time to time.
Another significant proposal relates to investment managers acting on behalf of DMA clients. SEBI has proposed removing the requirement that such investment managers must necessarily be registered with the regulator. The consultation paper notes that this requirement may have limited DMA adoption, particularly among FPIs. However, clients would remain responsible for the actions of their authorised investment managers and would be required to ensure compliance through contractual arrangements. Exchanges and brokers would also be required to maintain audit trails that establish the identities of both the client and the investment manager.
The consultation paper also proposes several technological and operational changes. These include: making backup and restoration systems mandatory for brokers, updating cybersecurity requirements to incorporate stronger authentication and encryption standards, expanding network security controls and aligning technology requirements with current industry practices.
SEBI has proposed removing several obsolete or redundant provisions, including those relating to trading through wireless application protocol (WAP), a technology used in early-generation mobile internet services. According to the regulator, WAP-based trading provisions have become outdated because the technology has long been superseded by modern mobile internet platforms.
The regulator has also proposed simplifying approval processes for smart order routing (SOR) systems. Instead of requiring separate applications to multiple exchanges, brokers would be able to apply through a common portal, with approvals being allocated among exchanges on a round-robin basis. SEBI said the change is intended to reduce duplication and compliance burdens while facilitating faster approvals.
In addition, the consultation paper proposes consolidating and harmonising several technology-related provisions currently spread across separate circulars governing stock exchanges, commodity derivatives exchanges, clearing corporations and depositories. SEBI said the objective is to simplify regulatory requirements, remove duplication and create a more uniform framework for technology governance across market infrastructure institutions.
SEBI has invited comments from market participants and the public on the consultation paper and the accompanying draft circulars. Comments and suggestions can be submitted through SEBI's online consultation portal until 13 July 2026.
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