Regulatory Roundup: Sebi’s Key Reforms For Equity Market In 2025

The year 2025 brought a sea of change in the regulations governing the Indian equity markets, as the Securities and Exchange Board of India (Sebi) rolled out a series of reforms to tighten oversight, improve transparency and strengthen investor protection.

From major changes in the derivatives segment to stricter disclosure rules for public issues, algorithmic trading and market intermediaries, here are the top major reforms Sebi made for the equity markets in 2025.

Algorithmic Trading Opened for Retail Investors

In a circular dated February 4, 2025, Sebi opened up application programming interface (API)-based algorithmic trading for retail investors under a regulated framework. According to the circular, brokers will be responsible for empanelling and supervising algo providers, while all algo orders must carry unique exchange-generated IDs for audit trails. Retail algos breaching prescribed thresholds will require registration through brokers. Previously, algo trading was largely restricted to institutional investors. The framework was initially slated to be implemented from August 1. However, the timeline was extended to take effect from October 1, 2025, with phased implementation extending into 2026.

Standardised KPI Disclosures in IPOs

To make initial public offerings (IPOs) more transparent and easier to compare, Sebi on February 29, 2025 issued a circular setting uniform standards for key performance indicator (KPI) disclosures in draft and final offer documents filed from April 1, 2025, onwards.

The new rules, developed with the Industry Standards Forum, mean companies now have to use consistent definitions, show historical trends, compare with peers, and get KPIs audited. Before this, KPI reporting was discretionary and reporting practices varied a lot across sectors. Sebi said the change will help retail investors get a clearer picture of a company’s performance and valuation.

Rights Issue Timeline Reduced to 23 Days

On March 11, 2025, Sebi came out with a circular to speed up the rights issues, which came into effect from April 7, 2025. The circular mandated companies to complete a rights issue within 23 working days of board approval, with a 7-30 day subscription window. The rules also let companies allot shares to specific investors if needed and have exchanges help with bid validation to make things smoother. Before this, rights issues could drag on for months. For retail investors, it means faster issues, clearer timelines, and an easier experience overall.

Sebi Partners with Digilocker

Sebi partnered with DigiLocker to provide investors a one-stop digital hub for unclaimed assets. Starting April 1, 2025, asset managers, registrars, depositories, and know-your-customer (KYC) registration agencies (KRAs) were mandated to link their systems with DigiLocker to allow investors to easily check their demat holdings, mutual fund statements, and any unclaimed dividends or redemptions online. Investors can even set up DigiLocker nominees for automatic alerts and smoother transfer of assets. Before this, unclaimed assets were scattered across intermediaries and claims were mostly manual. This partnership is aimed at making access to documents easier, reduce paperwork, and make the process of claims faster.

Margin Collection Tightened to T+1 in Cash Market

Through a circular dated April 28, 2025, Sebi directed brokers to collect all client margins by the settlement day (T+1) in the cash market. Upfront Value-at-Risk (VaR) and Extreme Loss Margin (ELM) still need to be collected before trades are executed. Previously, brokers had up to T+2 working days to collect these margins. The change, which aligns margin collection with the T+1 settlement cycle, aims to reduce risk and make trading safer for investors.

Equity Derivatives to Expire Only on Tuesdays or Thursdays

Through a circular dated May 26, 2025, Sebi brought uniformity to equity derivatives expiries, allowing contracts to expire only on Tuesdays or Thursdays. Under the revised framework, each stock exchange will pick one of these days for its weekly derivatives, while all other equity derivatives will have to expire in the last week of the month with a minimum one-month tenure. Earlier, exchanges followed different expiry schedules, leading to multiple expiry days in a week and higher volatility. After this, BSE went for Thursday expiries and NSE chose Tuesday as the expiry day.

Tighter F&O Norms to Curb Excessive Speculations

The market watchdog issued a fresh set of rules to tighten risk monitoring and improve trading convenience in the equity derivatives segment. A key shift was the move to a delta-based Future Equivalent Open Interest (FutEq OI) framework, which gives a clearer picture of actual market exposure. The regulator also reworked position limits for single stocks, and tightened rules during ban periods to ensure actual reduction in positions. It also introduced intra-day monitoring of position limits, caps on index options exposure, entity-level limits, and a pre-open session for derivatives trading. The changes are aimed at lowering concentration risk and making derivatives trading more stable and predictable.

Sebi Eases Transmission of Securities, Cuts Compliance and Tax Hassles

Sebi on September 19, 2025, issued a circular to make transferring securities from a nominee to legal heirs smoother, which came into effect from January 1, 2026. The key change was the introduction of a standard reporting code, “TLH” (Transmission to Legal Heirs), which registrar and transfer agents (RTAs), issuers, depositories, and depository participants will use when reporting such transfers to tax authorities. Earlier, these transfers were often treated as taxable, causing delays and extra paperwork. With this change, passing on securities to heirs would be simpler, faster, and less of a hassle for investors.

Measures to Make REITs, InvITs More Accessible

The regulator re-classified real estate investment trusts (Reits) as ‘equity’ instruments and retained ‘hybid’ classification for infrastructure investment trusts (InvITs), for the purpose of investments by mutual funds and specialised investment funds (SIFs). Further, the regulator also reduced the minimum investment size for privately placed InvITs to Rs 25 lakh. These measures are aimed at widening investor participation and strengthening these investment vehicles.