Sebi plans review of MTF margin rules to streamline risk management

Markets regulator Sebi is looking to review the margin framework under margin trading funding (MTF) in a bid to streamline risk management at clearing corporations.

In its annual report for 2024-25, Sebi said a "comprehensive review exercise is being undertaken with respect to the currently applicable margining framework."  Alongside this, a review of MTF and the scrips eligible under it is also under consideration.

Margin trading lets investors buy shares even if they do not have the full amount. They can purchase shares by paying only part of the price, while the rest is covered through a margin deposited in cash or as shares kept as collateral.

In addition to the review of margin rules, Sebi is also considering changes to the regulatory framework for angel funds. The review will focus on fundraising processes, investment conditions, and operational aspects, with the objective of facilitating ease of doing business and streamlining regulatory requirements.

Angel funds play a pivotal role in channelising the capital of angel investors to startups in need of funding.

Sebi has further proposed to review the classification of REITs and InvITs as hybrid instruments. This move comes in response to representations from various stakeholders, the presence of equity-like features in these instruments, the development of the market ecosystem over the last decade, and global practices.

A review of the regulatory framework for mutual funds is also on the cards, aimed at ensuring that the regulations remain effective, adaptable, and aligned with the evolving market landscape.

As part of this, Sebi is examining the restrictions presently prescribed for asset management companies (AMCs), after receiving feedback from the mutual funds industry, including the AMFI.

In line with these efforts, Sebi intends to expand the range of permissible investment strategies under Specialised Investment Funds (SIFs).

At present, SIFs allow asset management companies to offer a limited set of strategies across equity, debt, and hybrid categories.

Introduced to bridge the gap between mutual funds and portfolio management services (PMS) in terms of portfolio flexibility, the SIF framework requires investors to commit at least Rs 10 lakh across all SIF strategies.