Sebi floats reforms to ease FPI fund settlement, KYC

Acting on market feedback, the Securities and Exchange Board of India (Sebi) released a consultation paper on Friday that proposes to allow foreign portfolio investors (FPIs) to net funds, a move aimed at easing settlement rules to lower funding costs and address operational inefficiencies.

- Apoorva Aijith

The move followed a statement to the effect by Sebi chairman Tuhin Kanta Pandey at an event on Friday morning. The draft paper is open for public comment still 6 February.

A separate consultation paper proposed reforms to ease KYC onboarding and updating pains faced by investors.

Further, Pandey referred to another proposal during his address at the Samvad, a symposium on security markets hosted by Sebi, on Friday morning. “We are looking at closing auction session very closely and I should presume that the circular will be out soon, possibly today,” he said.

However, while the consultation paper on netting was released on Friday, the one on closing auction was not released till press time.

A closing auction mechanism determines a stock’s final closing price by aggregating buy and sell orders into one price at the end of the trading session. It is intended to curb end-of-day volatility, improve price discovery, and facilitate execution of large trades through a structured session after continuous trading ends.

The netting paper seeks to address a key demand from the market to ease settlement norms. At present, FPIs must settle all trades on a gross basis, even when purchases and sales occur the same day. So, an investor that buys and sells securities of equal value is required to separately fund the purchase and deliver the sale, despite the transactions offset-