SEBI proposes stricter MTF norms, wider funding options for brokers
The regulator has proposed increasing the minimum net-worth requirement for brokers offering MTF to Rs 5 crore from Rs 3 crore. It has also suggested allowing brokers structured as limited liability partnerships (LLPs) to offer the facility.
SEBI has proposed expanding funding avenues for brokers by permitting borrowing through non-convertible debentures (NCDs) and other debt instruments.
The regulator has also proposed revising exposure limits. Under the proposal, MTF exposure would not exceed borrowed funds and available net worth. A portion of the broker's capital would remain ring-fenced for core broking operations, while the remaining net worth could be deployed for MTF within prescribed limits.
Further, SEBI has proposed allowing all forms of collateral accepted by clearing corporations in the cash market to be used for MTF transactions. It has also suggested fungibility between clients' regular trading and MTF accounts, enabling easier transfer of excess funds and securities.
In addition, brokers may get a 30-day window to rebalance positions if securities funded under MTF lose their eligibility status.
SEBI said the review was necessitated by the growing volumes of trades under the MTF segment. The regulator has invited public comments on the proposals until 9 July 2026 before finalising the revised framework.
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