SEBI reviews short-selling framework, plans AI guidelines to deepen capital markets

SEBI Chairman Tuhin Kanta Pandey announced plans to review the short-selling framework, introduce bond index derivatives, issue AI guidelines and simplify market access. The regulator is also considering reforms in equity, commodity and debt markets to deepen participation

Mumbai: Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Friday outlined a roadmap to further deepen India’s capital markets, announcing plans to review the short-selling and securities lending and borrowing (SLB) framework, introduce bond index derivatives and issue guidelines for the responsible use of artificial intelligence (AI).

Speaking at an event, Pandey said the market regulator remains focused on reducing market frictions, broadening participation and supporting sustainable growth amid an uncertain global environment.

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As part of efforts to strengthen cash markets, SEBI is undertaking a comprehensive review of the SLB and short-selling framework.

The objective is to improve the linkage between cash and derivatives markets while enhancing overall market liquidity.

Pandey also said SEBI is working with the Reserve Bank of India (RBI) on introducing derivatives linked to bond indices, a move aimed at expanding investment and hedging opportunities in the fixed-income segment.

In the equity derivatives market, the regulator is examining the possibility of introducing longer-tenure futures and options contracts.

For commodity derivatives, SEBI is considering extending early pay-in benefits to options contracts, gradually moving towards physical settlement in select agricultural commodities and reviewing existing position limits.

The regulator is also reviewing the Innovators Growth Platform to improve fundraising opportunities for companies operating in strategic sectors such as artificial intelligence, semiconductors, clean energy, biotechnology, advanced materials and defence technology.

On the debt market front, SEBI is working on a market-making framework for corporate bonds and measures to deepen the municipal bond market.

The regulator is also exploring the tokenisation of corporate bonds as part of efforts to modernise market infrastructure.

Pandey said regulations governing municipal debt securities and portfolio management services are currently under review.

SEBI is also examining changes to the delisting framework and the Listing Obligations and Disclosure Requirements (LODR) regulations to ensure governance and disclosure standards remain aligned with evolving market needs.

Addressing foreign investment, the SEBI chief said the regulator would continue efforts to simplify market access by easing know-your-customer (KYC) requirements and adopting a risk-based approach to disclosure norms.

SEBI will also coordinate with other authorities to streamline KYC procedures for non-resident Indians.