SEBI to review MTF margin framework to strengthen risk management
What's the story
The Securities and Exchange Board of India (SEBI) is planning to review the margin framework under Margin Trading Funding (MTF). The move is aimed at improving 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."
Scope of review
Comprehensive review of MTF
Along with the margin framework, SEBI is also looking into the MTF and the scrips that are eligible under it. The move comes as part of a broader effort by the regulator to ensure effective risk management practices in India's financial markets. Margin trading allows investors to buy shares without having the full amount by paying only a part of the price while covering the rest through cash or shares kept as collateral.
Angel fund review
Changes to regulatory framework for angel funds
Along with the margin rules, SEBI is also looking at changes to the regulatory framework for angel funds. The review will focus on fundraising processes, investment conditions, and operational aspects. The aim is to make it easier to do business and simplify regulatory requirements. Angel funds play a key role in channeling capital from angel investors to startups in need of funding.
Instrument classification
REITs and InvITs classification review
SEBI has also proposed a review of the classification of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) as hybrid instruments. The proposal comes in light of representations from various stakeholders, equity-like features in these instruments, market ecosystem development over the past decade, and global practices. This move is part of SEBI's broader effort to ensure effective regulation across different financial instruments.
Mutual fund review
Mutual fund regulatory framework review
A review of the regulatory framework for mutual funds is also on the cards. The aim is to ensure that regulations remain effective, adaptable, and aligned with the evolving market landscape. As part of this, SEBI is looking at restrictions currently prescribed for Asset Management Companies (AMCs), after receiving feedback from the mutual funds industry, including AMFI.
Strategy expansion
Expansion of permissible investment strategies under SIFs
Along with these reviews, SEBI also plans to expand the range of permissible investment strategies under Specialized Investment Funds (SIFs). Currently, SIFs allow AMCs to offer a limited set of strategies across equity, debt, and hybrid categories. The SIF framework was introduced to bridge the gap between mutual funds and portfolio management services in terms of portfolio flexibility.