Finance Ministry overhauls old stock exchange rule to boost clarity and ease broker compliance

In a move aimed at aligning regulatory norms with the evolving business landscape of India's financial markets, the Department of Economic Affairs (DEA) has amended Rule 8 of the Securities Contracts (Regulation) Rules (SCRR), 1957. Announced on May 19 via an official release, the amendment is designed to offer greater regulatory clarity and ease of doing business for brokers.

The revision comes in the wake of a discussion paper issued by the DEA in September 2024, which raised concerns over the ambiguous language in Rule 8 — particularly the undefined scope of the term “any business.” The paper noted that this lack of clarity has left the rule open to varying interpretations.

According to a press release, the DEA has now formalised the changes through Gazette Notification G.S.R. 318(E). Rule 8, which outlines eligibility criteria for members of recognized stock exchanges, previously barred brokers from engaging in any business activity beyond securities or commodity derivatives — unless acting as a broker or agent and without incurring personal financial liability.

The amendment reflects the DEA's recognition of the growing complexity and interconnectedness within the financial sector, along with the evolving roles of brokers. “Given the growth in the scale and interconnectedness of the financial sector and the evolution of nature of business of brokers with time,” the release stated, “the DEA felt it necessary to review the appropriateness of safeguards embedded in the Rules.”

The changes follow stakeholder consultations and are part of the government’s broader initiative to streamline regulations. The updated rule aims to ensure that brokers can operate efficiently without undermining the regulatory framework, thereby supporting the continued growth and integrity of India’s capital markets.