SDG 9: Industry, Innovation and Infrastructure | SDG 16: Peace, Justice and Strong Institutions
Institutions: Securities and Exchange Board of India (SEBI) | Ministry of Finance
The Securities and Exchange Board of India (SEBI) has announced a dual strategy in its October 2025 bulletin: making business operations easier for listed companies while strengthening safety rules for high-risk trading. This is part of SEBI’s effort to promote “smart regulation”.
Key changes focus on two major areas:
Easing Compliance (Related Party Transactions): Cutting down company paperwork with new RPT Rules
Increasing Market Safety (Derivatives/F&O): Making stock market betting safer with new F&O Rules
These measures underscore SEBI’s commitment to India’s “Ease of Doing Business” agenda by cutting red tape while simultaneously fortifying the market against volatility and insider risk. By simplifying RPT disclosures, SEBI encourages agile corporate governance, and by tightening F&O limits, it protects the stability required to attract long-term capital.
Cutting Down Company Paperwork (New RPT Rules)
Imagine a large, publicly traded company is owned by a single family. When that company buys supplies from another company also owned by that same family, this is called a Related Party Transaction (RPT).
SEBI makes companies disclose these deals to the public to prevent the owners from giving unfair deals to themselves at the expense of other shareholders. The new rules make this process faster and easier:
1. Introducing “Materiality” Thresholds
The Problem: Previously, even very small, routine RPTs (like buying a few boxes of paper from the owner’s supply company) required tons of paperwork for the company’s Audit Committee to approve. This was slow and burdensome.
The Solution: SEBI has introduced a two-tiered system (a simplified disclosure mechanism).
Small Deals: If a deal is below a certain value (the lower of ₹10 crore or 1% of the company’s annual sales), it is now considered “less material” and only requires a simplified set of documents.
Big Deals: Only deals that cross this high threshold require the full, exhaustive documentation and comprehensive review.
2. Why it Matters (Ease of Doing Business)
The Impact: This policy, approved by the SEBI Board, is expected to dramatically reduce the volume of administrative documentation (by an estimated 40–50%).
The Goal: By cutting red tape on routine, low-risk transactions, SEBI helps the company’s board and management move faster and focus their attention—and the regulator’s oversight—on the truly large and high-risk exposures that could genuinely harm investors.
The overall aim is to promote corporate governance by improving efficiency, rather than diluting accountability.
Making Stock Market Betting Safer (New F&O Rules)
Imagine the stock market has two areas: the regular Stock Buying Area (Cash Market), where you buy actual shares of a company, and the Betting Area (Futures & Options or F&O), where you bet on where a stock’s price will go without owning the shares.
SEBI’s new rules are designed to curb risky betting and make the Betting Area safer:
1. Limiting Individual Bets (Position Limits)
What it means: SEBI is setting limits on how much one person can bet on a single company’s stock in the Betting Area.
The Rule: A regular person (retail investor) is now restricted to having a maximum bet size that cannot exceed 10% of that company’s overall allowed market bet limit (the MWPL).
Why it matters: This prevents any single small investor from taking on excessive risk that they cannot afford, which could wipe them out and cause problems for their broker.
2. Tying Bets to Reality (The MWPL Rule)
What it means: The overall limit for betting on a company’s stock (Market-Wide Position Limit or MWPL) is now tied to how easy it is to actually buy and sell that company’s real shares.
The Rule: SEBI now calculates the MWPL based on the company’s actual trading volume and the shares freely available to trade (free float).
Why it matters: This ensures the size of the total bets (derivatives) does not get too big compared to the size of the underlying asset (the stock). If too many bets are placed on a thinly traded stock, a few big traders can easily manipulate the price. By linking the bet limit to real-world liquidity, SEBI makes the market harder to skew.
In essence, SEBI is telling the market: “You can bet, but your bet size must be reasonable relative to the stock’s actual market size, and no single person can risk the stability of the entire market.”
Follow the full news here: SEBI Bulletin - October 2025