SEBI Proposes Higher Net Worth Requirement for Brokers Offering MTF

SEBI has released a consultation paper proposing a comprehensive review of the Margin Trading Facility (MTF) framework. The proposed changes aim to enhance operational efficiency, improve ease of doing business for stockbrokers and strengthen risk management and margining practices in the MTF segment.

Stakeholders may submit their comments on the proposals by 09 July 2026.

1. Minimum Net Worth Requirement Proposed to be Increased

SEBI has proposed increasing the minimum net worth requirement for stockbrokers offering MTF services from:

₹3 crore to ₹5 crore

The proposal seeks to ensure that only adequately capitalised intermediaries offer margin trading facilities to investors.

2. LLPs May Be Allowed to Offer MTF

Under the proposed framework, stockbrokers operating as Limited Liability Partnerships (LLPs) may also be permitted to provide Margin Trading Facilities to their clients.

This would expand the category of eligible intermediaries that can offer MTF services.

3. Changes Proposed in Exposure Norms

SEBI has proposed a revised framework for the deployment of broker net worth in MTF operations.

Under the proposal:

• An amount equal to the lower of:

  • Twice the minimum net worth required for broking operations; or
  • 50% of the broker’s net worth

  shall remain ring-fenced.

• The remaining net worth may be deployed towards MTF activities, subject to the prescribed overall exposure limits.

The objective is to balance business flexibility with prudent risk management.

4. Uniform Rights and Obligations Document Proposed

SEBI has proposed the introduction of a uniform Rights and Obligations Document to be jointly prepared by all stock exchanges.

The proposed document aims to:

• Ensure consistency across exchanges;
• Provide greater clarity to stockbrokers and clients; and
• Standardise disclosures relating to MTF transactions.

Stock exchanges may be required to issue the document within 30 days of the finalisation of the guidelines.

5. Expansion of Permitted Funding Sources

The consultation paper proposes widening the sources of funds that may be utilised for providing Margin Trading Facilities.

In addition to the existing permitted sources, stockbrokers may be allowed to raise funds through:

• Issuance of Non-Convertible Debentures (NCDs); and
• Other eligible debt instruments.

This is expected to provide greater funding flexibility for MTF operations.

6. Revised Reporting Mechanism for MTF Transactions

SEBI has proposed a new reporting framework under which:

• Stockbrokers would report MTF details to stock exchanges on a T+1 basis before the pay-in timelines of clearing corporations.
• Stock exchanges would thereafter consolidate the MTF positions of all stockbrokers and provide the information to the clearing corporations.

The proposal is intended to improve monitoring and operational efficiency.

7. Separate Client-Wise Ledgers Mandatory

To strengthen transparency and investor protection, stockbrokers would be required to maintain:

• Separate client-wise fund ledgers; and
• Separate client-wise securities ledgers

for clients availing the Margin Trading Facility.

This measure aims to improve segregation and tracking of client assets.

8. Objective of the Proposed Changes

The proposed amendments seek to:

• Strengthen risk management in the MTF segment;
• Improve operational efficiency for intermediaries;
• Enhance investor protection and transparency;
• Expand funding avenues for brokers;
• Standardise client documentation; and
• Facilitate ease of doing business while maintaining prudent regulatory safeguards.

9. Public Comments Invited

SEBI has invited comments and suggestions from stakeholders on the consultation paper.

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