EXTENSION OF TIMELINE FOR FORMULATION OF IMPLEMENTATION STANDARDS PERTAINING TO SEBI CIRCULAR ON "SAFER PARTICIPATION OF RETAIL INVESTORS IN ALGORITHMIC TRADING"1
Securities Exchange Board of India ("SEBI") issued a circular "Safer participation of retail investors in algorithmic trading" dated February 04, 2025, which aimed at ensuring safer participation of retail investors in algorithmic trading, with implementation standards to be developed by the Brokers' Industry Standards Forum under stock exchanges and in consultation with SEBI by April 1, 2025. However, upon receiving a request from the stock exchanges for an extension to address unresolved issues, SEBI decided to postpone the effective date of implementation standards to May 01, 2025, and the applicability of the circular's provisions to August 01, 2025. Exchanges are directed to implement the necessary systems, amend relevant rules, inform brokers, and publicize the circular. The circular is issued under SEBI's authority to protect investors and regulate the securities market.
This circular came into effect immediately.
RECOGNITION AND OPERATIONALIZATION OF PAST RISK AND RETURN VERIFICATION AGENCY (PARRVA)2
SEBI has issued guidelines on the external and internal evaluation of the performance of statutory committees within Market Infrastructure Institutions ("MIIs") such as stock exchanges, clearing corporations, and depositories. The evaluation will assess various committees including the member committee, nomination and remuneration committee, risk management committee, and others.
On February 04, 2025, SEBI issued Circular No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/51, introducing a revised framework to facilitate the safer participation of retail investors in algorithmic trading. Under this framework, brokers are designated as principals, while algorithm ("algo") providers act as their agents. All algo orders transmitted via Application Programming Interfaces ("APIs") must be tagged with a unique identifier. Brokers are mandated to implement stringent security measures, including whitelisting static IPs, enforcing two-factor authentication, and adopting OAuthbased authentication protocols. Additionally, brokers bear the responsibility for investor grievance redressal and continuous monitoring of API usage. Stock exchanges are tasked with overseeing algo trading activities, approving algos, and establishing empanelment criteria for algo providers.
The circular classifies algos into two categories (a) white box and (b) black box. White box algos, characterized by transparent and disclosed logic, are subject to a fast-track registration process. In contrast, black box algos, which feature non-replicable logic, require research analyst registration and detailed reporting. Stock exchanges are directed to develop both fast-track and standard registration processes for algos, ensuring compliance with confidentiality measures. The Broker's Industry Standards Forum, operating under SEBI's guidance, is responsible for finalizing implementation standards by April 01, 2025.
SEBI has mandated that stock exchanges take necessary steps to implement the provisions of this circular. This includes establishing appropriate systems and procedures, amending relevant bye-laws, rules, and regulations, and disseminating the provisions to brokers through their websites. The circular is issued under SEBI's authority to protect investor interests and regulate the securities market. The provisions outlined in this circular aim to enhance the safety and transparency of retail investor participation in algorithmic trading. This circular came into effect immediately.
CLARIFICATION ON THE POSITION OF COMPLIANCE OFFICER IN TERMS OF REGULATION 6 OF THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS) REGULATIONS, 20153
SEBI, vide Circular no. SEBI/HO/CFD/PoD2/CIR/P/2025/47 dated April 01, 2025 issued a clarification which states that Regulation 6(1) of the SEBI (LODR) Regulations, 2015, as amended on December 12, 2024, requires the Compliance Officer of a listed entity to be in whole-time employment, designated as Key Managerial Personnel, and positioned not more than one level below the board of directors. SEBI clarified that "one level below" refers to the Compliance Officer's placement directly under the Managing Director or Whole-Time Director(s) on the organizational chart. If the entity lacks such directors, the officer should report not more than one level below the CEO, Manager, or equivalent person overseeing daily operations.
RELAXATION OF PROVISION OF ADVANCE FEE RESTRICTIONS IN CASE OF INVESTMENT ADVISERS AND RESEARCH ANALYSTS4
SEBI vide Circular no. SEBI/HO/MIRSD/MIRSDPoD/P/CIR/2025/48 provides relaxations on advance fee. The amendments to the SEBI (Research Analysts) Regulations in December 2024, received feedback that limiting advance fees to three months for Research Analysts and two quarters for Investment Advisers discouraged longterm recommendations. In response, SEBI proposed and has approved extending the permissible advance fee period to one year for both RAs and IAs, subject to client agreement. These fee-related provisions—including limits, payment modes, and refund rules—apply only to individual and Hindu Undivided Family (HUF) clients who are not accredited investors, while non-individual clients, accredited investors, and institutional clients seeking proxy advice will operate under bilaterally negotiated contracts. The circular aims to balance investor protection with industry flexibility. This circular came into effect immediately.
STANDARDIZED FORMAT FOR SYSTEM AND NETWORK AUDIT REPORT OF MARKET INFRASTRUCTURE INSTITUTIONS (MIIS)5
SEBI vide Circular No. SEBI/HO/MRD/TPD/P/CIR/2025/50, issued on April 29, 2025, states that it will assign unique IDs to each observation in a bid to simplify the tracking of both current and historical audit issues. This new framework aims to improve data quality, ensure compliance with regulatory requirements, and streamline the monitoring of audit observations. This will apply to audits conducted from the fiscal year 2024-25, or the second half of the fiscal year, depending on the audit frequency. 3 SEBI/HO/CFD/PoD2/CIR/P/2025/47. 4 SEBI/HO/MIRSD/ MIRSD-PoD/P/CIR/2025/48. The standardized format for system and network audit report would help to increase the data quality, capture of relevant information as per regulatory requirements in a streamlined and standardized manner across MIIs, monitor compliance requirements in a more focused manner, ease of traceability of current/historical open observations found during audit at the end of MII and Sebi by assigning a unique ID to each observation. Presently, all MIIs are required to conduct system and network audit and each MII has adopted a different template for such reporting. As per the circular, the standardized system and network audit report format include several key sections to ensure comprehensive reporting.
Going by the format, MIIs are required to disclose basic information such as name, address, and contact details of the auditee and audit team. Furthermore, they need to disclose audit details such as period, methodology, and tools used. The IT environment overview highlights major projects or developments undertaken during the audit period, providing insights into the technological landscape of the MII.
The scope of audit involves the compliance with relevant regulatory requirements and identifies any technical glitches encountered. SEBI stated that observations and findings detail the issues discovered during the audit, with each observation assigned a unique ID to facilitate easy tracking and follow-up.
The compliance status section assesses adherence to Sebi mandates, including critical area like disaster recovery drills, stress testing, and business continuity planning. Additionally, the report includes a list of pending issues, detailing unresolved observations from previous audits along with reasons for their non-closure. The final notes cover any limitations of the audit, auditor comments, and a concluding assessment. This circular will come into effect for the audit period of FY 2024-25 or second half of the FY 2024-25.
CLARIFICATION ON REGULATORY FRAMEWORK FOR SPECIALIZED INVESTMENT FUNDS ('SIF')6
SEBI, through its circular dated February 27, 2025, addressed clarifications on the Regulatory Framework for Specialized Investment Funds ("SIFs") following industry feedback. It clarified that the provisions regarding security maturity in interval schemes under the Mutual Fund Master Circular dated June 27, 2024 will not apply to Interval Investment Strategies within SIFs. Additionally, the minimum investment threshold has been revised to require an aggregate investment of at least INR 10,00,000 (Indian Rupee Ten Lakh) at the PAN level across all SIF strategies, with exemptions for mandatory Asset Management Companies investments by designated employees. These changes aim to enhance regulatory clarity and investor protection. This circular shall come into effect immediately.
AMENDMENT TO CIRCULAR FOR MANDATING ADDITIONAL DISCLOSURES BY FOREIGN PORTFOLIO INVESTMENTS ("FPIS") THAT FULFIL CERTAIN OBJECTIVE CRITERIA7
SEBI through its Master Circular for Foreign Portfolio Investors ("FPI"), Designated Depository Participants and Eligible Foreign Investors dated May 30, 2024, had introduced enhanced disclosure requirements for FPIs and Offshore Derivative Instruments ("ODI") subscribers meeting a specified equity AUM threshold in Indian markets. Initially set at INR 250,000,000,000 (Indian Rupee Twenty-Five Thousand Crore), the threshold applied to individual FPIs or investor groups under Regulation 22(3) of the SEBI (Foreign Portfolio Investors) Regulations, 2019. Such disclosure rules also applied to subscribers of ODIs, as per a SEBI circular issued on December 17, 2024.
To ease compliance while still maintaining regulatory oversight, SEBI has now revised the threshold under the size criteria from INR 250,000,000,000 (Indian Rupee TwentyFive Thousand Crore) to INR 500,000,000,000 (Indian Rupee Fifty Thousand Crore). As a result, multiple sub-paragraphs in Parts C and D of the FPI Master Circular have been modified to reflect this updated threshold. These changes aim to focus enhanced disclosure requirements on only the largest market participants, reducing the compliance burden on smaller FPIs.
This circular has been issued under SEBI's authority to protect investor interests, promote market development, and ensure effective regulation. This update underscores SEBI's commitment to balancing transparency with practical considerations for foreign investors. This circular shall come into effect immediately.
TRADING WINDOW CLOSURE PERIOD UNDER CLAUSE 4 OF SCHEDULE B READ WITH REGULATION 9 OF SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF INSIDER TRADING) REGULATIONS, 2015 ("PIT REGULATIONS") – EXTENSION OF AUTOMATED IMPLEMENTATION OF TRADING WINDOW CLOSURE TO IMMEDIATE RELATIVES OF DESIGNATED PERSONS, ON ACCOUNT OF DECLARATION OF FINANCIAL RESULTS8
SEBI vide SEBI Circular No. SEBI/HO/IMD/IMDRAC/P/CIR/2025/54, issued on April 29, 2025, introduced significant amendments to the SEBI (Issue of Capital and
Disclosure Requirements) Regulations, 2018, aimed at enhancing transparency and investor protection in public offerings.
Under Clause 4 of Schedule B and Regulation 9 of the PIT Regulations, trading by Designated Persons ("DP") is monitored using a concept called a "notional trading window." This window must be closed whenever the Compliance Officer determines that DPs or a class of such persons may have access to Unpublished Price Sensitive Information (UPSI). One of the common instances of trading window closure is around the announcement of financial results — from the end of a financial quarter until 48 hours after the disclosure of results.
Key changes include the until now, the focus of automated restrictions — including PAN-level trading freezes — was primarily on DPs themselves. However, SEBI's new circular mandates extending this automation to their immediate relatives as well. This is a significant move, considering that trading via family members was a known grey area in insider trading enforcement.
This updated framework will now automatically restrict the trading capabilities of not just the DPs but also their immediate family members during specified blackout periods. It will be done by freezing their PANs at the security level — covering both on-market and off-market transactions, as well as pledge creation
The process will be rolled out in two phases: Phase 1 (Effective July 01, 2025): Applies to the top 500 (five hundred) listed companies by market capitalization as on March 31, 2025.
Phase 2 (Effective October 01, 2025): Will cover all remaining listed companies, including those that list after this circular. Key Compliance Measures
- Companies must confirm and upload data at least 2 (two) trading days before the window closure.
- The DD will inform Stock Exchanges and other depositories at least one trading day before the blackout.
- The PAN-level freeze will include all equity and derivative trades and apply to all identified demat accounts.
- Any updates to DP or family member information must be processed within two trading days.
- The companies may also request exemptions under specific provisions of the PIT Regulations, which must be processed within defined timelines.
These regulatory changes aim to bolster investor confidence by ensuring greater accountability and transparency in the capital markets.
CHANGE IN CUT-OFF TIMINGS TO DETERMINE APPLICABLE NAV WITH RESPECT TO REPURCHASE/ REDEMPTION OF UNITS IN OVERNIGHT SCHEMES OF MUTUAL FUNDS9
SEBI, through its circular dated December 12, 2023, introduced a framework titled "Upstreaming of clients' funds by Stockbrokers (SBs)/Clearing Members (CMs) to Clearing Corporations (CCs)," aimed at strengthening the protection of investors' funds. Under this framework, SBs and CMs are required to upstream all clear credit balances of clients to the Clearing Corporations at the end of each day. These funds can be placed in the form of cash, lien on fixed deposit receipts created from client funds, or as pledged units of Mutual Fund Overnight Schemes (MFOS), ensuring funds are safeguarded within a secure and regulated system.
To facilitate the upstreaming of client funds using pledged MFOS units, a working group including AMFI, mutual fund industry participants, and the Mutual Funds Advisory Committee (MFAC) proposed a revision to the NAV cut-off timings for repurchase of overnight fund units. This proposal, following industry consultation and public feedback, led to an amendment in paragraph 8.4.5.4 of SEBI's Mutual Fund Master Circular. The updated regulation introduces specific cut-off timings for applying NAV: applications submitted by 3:00 PM will use the NAV of the day before the next business day, while those submitted after 3:00 PM will use the NAV of the next business day. Notably, for online applications, a later cut-off time of 7:00 PM is introduced for overnight fund schemes.
The updated cut-off timing framework is designed to enhance operational efficiency and ensure timely settlement of pledged MFOS units, thereby supporting the broader objective of upstreaming client funds. Issued under SEBI's statutory powers, this circular reinforces SEBI's commitment to safeguarding investor interests and maintaining robust regulatory oversight across market intermediaries. This circular shall come into effect from June 01, 2025.
SPECIALIZED INVESTMENT FUNDS ("SIF") – APPLICATION AND INVESTMENT STRATEGY INFORMATION DOCUMENT ("ISID") FORMATS10
SEBI Circular No. SEBI/HO/IMD/IMD-RAC/P/CIR/2025/54, introduces significant amendments to the SEBI (Mutual Funds) Regulations, 1996, aimed at enhancing transparency and investor protection in mutual fund schemes. The circular mandates that Asset Management Companies ("AMCs") disclose the results of stress testing for all mutual fund schemes, providing investors with insights into the schemes' resilience under various market conditions. Additionally, the circular requires AMCs to disclose the half-yearly returns and yield of schemes, along with a standardized risk-o-meter, to facilitate better-informed investment decisions.
To improve transparency, the circular also mandates the separation of expense ratios and returns data for regular and direct plans of mutual funds. This segregation aims to provide clearer information to investors, enabling them to make more informed choices based on the costs and performance of different investment options. Furthermore, the circular introduces a color-coded system for the risk-ometer, ranging from low to very high, to visually represent the levels of risk associated with each scheme.
The circular also standardizes the communication of any changes in the risk-o-meter to investors, ensuring that such modifications are promptly and clearly conveyed. These measures are part of SEBI's ongoing efforts to simplify mutual fund disclosures, making them more accessible and easier to understand for investors. By promoting greater transparency and consistency in disclosures, SEBI aims to enhance investor confidence and foster more informed decision-making in the mutual fund industry. This circular shall come into effect immediately.
TIMELINES FOR COLLECTION OF MARGINS OTHER THAN UPFRONT MARGINS – ALIGNMENT TO SETTLEMENT CYCLE11
SEBI has updated the margin collection framework for Trading Members ("TMs") and Clearing Members ("CMs") in the cash segment as outlined in the Master Circular dated August 9, 2024. While it was already mandatory for TMs/CMs to collect upfront VaR ("Value at Risk") margins and ELM ("Extreme Loss Margins"), they were previously allowed up to T+2 working days to collect other margins from clients. However, following the reduction of the settlement cycle in the cash market to T+1 from January 27, 2023, SEBI has revised the timeline, now requiring collection of all other margins (excluding VaR and ELM) by the settlement day itself.
The modifications to the Master Circular specify that TMs/CMs must collect VaR and ELM upfront before trading, while other margins must be collected no later than the settlement day. If the client makes full pay-in (of both funds and securities) by the settlement day, any pending other margins will be considered as collected, and no penalty will apply. However, if the pay-in is not completed and the margins are also not collected by the settlement day, penalties will be levied. The extended time until the settlement day is given only for practical ease and should not be interpreted as an extension of the client's obligation to delay margin payment.
SEBI has directed all Stock Exchanges and Clearing Corporations to make the necessary rule amendments and inform all market participants accordingly. This circular has been issued under SEBI's regulatory powers to ensure investor protection and the orderly functioning of securities markets by reinforcing robust risk management practices in line with the T+1 settlement cycle. This circular shall come into effect immediately.
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