SEBI on Thursday proposed a series of changes to the Margin Trading Facility (MTF) framework, including allowing brokers to raise funds through non-convertible debentures (NCDs), increasing the minimum net worth required to offer MTF to ₹5 crore, and easing operational requirements for brokers while retaining key risk safeguards.

The MTF framework was introduced in 2004 and last underwent a comprehensive review in 2017.

“The proposals seek to enhance operational efficiency and ease of doing business for stock brokers, and to strengthen the calibration of risk and margining in the MTF segment,” SEBI said.

The market regulator has suggested expanding the sources of funds available to brokers by permitting borrowing through NCDs and other debt instruments in addition to existing sources. It has also proposed raising the minimum net worth requirement for brokers offering MTF from ₹3 crore to ₹5 crore, while allowing Limited Liability Partnerships (LLPs) to provide the facility.

SEBI has proposed a revised exposure framework, under which brokers would be required to ring-fence a portion of their net worth for their core broking business, while permitting the remaining net worth to be used for MTF within an overall exposure limit of 5.5 times their net worth.

The regulator has also proposed allowing brokers to accept all collateral eligible in the normal cash market for MTF transactions and permit Early Pay-In (EPI) sale credits to be used as collateral under specified conditions.

Public comments on the proposals have been invited till July 9.

Other proposals

To address situations where an eligible security is downgraded or shifted out of the Group I category, SEBI has proposed providing brokers a 30-day rebalancing window to comply with regulatory requirements instead of requiring immediate adjustments.

SEBI has suggested a uniform Rights and Obligations document across stock exchanges, revised reporting timelines for brokers, fungibility between normal and MTF client ledgers and a mechanism to treat certain breaches of client-level exposure limits as “passive breaches”, subject to rectification within 30 days.

The regulator has, however, decided against reducing the higher maintenance margin applicable when client cash collateral is used for pay-in and the purchased security itself serves as collateral. Accordingly, it has proposed retaining the higher maintenance margin requirement of Value at Risk plus five times the Extreme Loss Margin ) for such transactions.

Published on June 18, 2026