The Securities and Exchange Board of India's (SEBI) draft proposal to overhaul how exchanges are governed promises simpler compliance, but risks weakening traditional checks on market oversight -- from relaxed board reporting to the merging of rulebooks for stock and commodity exchanges.

The regulator has proposed consolidating multiple master circulars governing stock and commodity exchanges into a single framework, while carving out a separate rulebook for clearing corporations. SEBI aims to reduce duplication and align regulation with the current market structure. On paper, that makes sense, but execution could be tricky, said experts.

"The rationale is straightforward -- commodity derivatives now operate as segments within stock exchanges, so having two sets of circulars is redundant," said Kunal Sharma, Managing Partner at Taraksh Lawyers & Consultants. "But the devil is in the details. If segment-specific risk management nuances around margin requirements or delivery are lost in a one-size-fits-all approach, we'll have traded administrative simplicity for operational ambiguity."

Execution risks

Rohit Jain, Managing Partner at Singhania & Co said consolidation "could streamline reference material and reduce duplication," but the "differences between stock and commodity exchange requirements might get blurred, leading to interpretational uncertainty."

Several circulars issued over the past year have yet to be folded into the existing framework, a lag that experts warn could create confusion during transition. Jain added that SEBI should publish a detailed mapping of old and new clauses and provide a transition window to ensure clarity.

The proposed separation of exchange and clearing corporation provisions can strengthen the clearing corporation's autonomy, but coordination gaps can emerge as the functions of trade execution and settlement are deeply interconnected. SEBI will need clear escalation hierarchies, joint stress testing, and incident-response protocols to prevent silos in supervision, experts said.

"Unified IPF must ring‑fence segment risks so commodity corpus and claims aren't diluted in practice. Flexible turnover thresholds and updated exit policy should be backed by transparent criteria and phased transition," Alay Razvi, Managing Partner at Accord Juris said.

Stricter outsourcing

Outsourcing rules are also being tightened as SEBI has clarified that vendor-governance standards are mandatory, not advisory. "This fundamentally changes the compliance landscape for exchanges," Kunal Sharma said. "Exchanges will need to upgrade their vendor management systems, conduct more extensive due diligence, implement continuous monitoring mechanisms, and establish board-level oversight for outsourced functions. Smaller platforms operating on lean models will feel the squeeze."

Board-level oversight is being adjusted as well. Vasudha Goenka, Partner at Cyril Amarchand Mangaldas, said: "The consultation paper has made proposals in respect of PIDs to balance administrative exigencies and board oversight. For example, currently PIDs are required to attend all meetings of PIDs, which may not be possible due to any personal exigency. So, some flexibility has been proposed."

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Published on October 12, 2025

SEBI's exchange overhaul risks blurring oversight lines in pursuit of simplicity: Experts