Stock market rules changing from April 1: Starting April 1, 2026, several key changes will come into effect across the stock market ecosystem. These reforms, introduced or amended by the capital market regulator Securities and Exchange Board of India (Sebi) and the Reserve Bank of India (RBI), are aimed at enhancing transparency, tightening risk controls, and supporting long-term stability.

Sunny Agarwal, head of fundamental research at SBI Securities, said that the new measures reflect a calibrated effort to curb excessive speculation and enhance the overall quality of market participation. 

“Market hopes for a gradual shift from trading to investing, disciplined capital allocation and better stability of markets. Regulatory tightening may cause short-term friction, but the broader direction remains constructive for long-term investors, with an emphasis on quality, transparency, and sustainable growth,” he said. 

Let’s have a detailed look at the new rules:

1. STT hike on F&O: In the Union Budget 2026-27, Finance Minister Nirmala Sitharaman had announced an increase in Securities Transaction Tax (STT) for futures and options (F&O) trading.

STT on Futures: 0.05 per cent (old rate: 0.02 per cent)

STT on Options (Premium): 0.15 per cent (old rate 0.10 per cent)

STT on Options (Exercised): 0.15% (old rate 0.125 per cent)

STT is levied and collected by the government.

2. 50:50 margin rule: Sebi has mandated that brokers should maintain a minimum of 50 per cent of the margin in cash, with the remaining 50 per cent in non-cash collateral (such as pledged shares) for all the positions in the F&O. This means that a higher cash amount is required to execute a trade. Cash margin (what is allowed): Free cash in the demat account, liquid mutual funds, and overnight funds. Stocks and equity mutual funds are not allowed as cash margin.

3. 12% surcharge on share buyback: A flat 12 per cent surcharge will be levied on capital gains from share buybacks. The 12 per cent surcharge will be applicable to individual or corporate shareholders making profits by selling shares in the buyback offer.

The new rule will raise the tax cost, because a lower surcharge structure was applied on buybacks earlier. Before this, no surcharge was levied on taxable income up to ₹50 lakhs, while taxable income between ₹50 lakhs and ₹1 crore attracted a 10 per cent surcharge on capital gains from buybacks.

4. Strict lending norms for brokers: The RBI has introduced a set of new lending rules for stock brokers.

– RBI has tightened the rules for banks lending to stock brokers. As per the new rule, all such credit should be collateral in nature, and stricter monitoring will be carried out on a daily basis.

– As per the new rule, in the case of bank guarantees issued to exchanges, a minimum of 50 per cent of such guarantees must be backed by collateral. Of this, at least 25 per cent must be in cash. This means that cash blockage for brokers will increase.

– RBI has introduced higher haircuts on equity collateral, to 40 per cent. This means that pledged shares worth ₹100 will be valued at ₹60 by banks. As a result, brokers will need to pledge a larger number of shares or assets to increase the value.

– RBI has prohibited bank funding for proprietary trading. In other words, banks can no longer fund stock brokers’ own trading books, although there are a few exceptions. Earlier, stock brokers were heavily dependent on bank funding for proprietary trading.

5. New algo trading rules: Algo trading happens when computers automatically buy and sell stocks using pre-defined rules. Let’s take a look at Sebi’s new algo trading framework:

– All algo strategies must be approved by exchanges via brokers. All approved algos will have a unique algo ID, and this ID will be tagged to each order, which will facilitate audit and traceability.

– Under the new framework, API access will be restricted for retail clients until they declare their strategy to the broker. Brokers will be responsible for monitoring API usage.

– All retail API users will be required to share one or two static IP addresses with their brokers. Brokers will register these IP addresses with the exchanges, and only orders originating from these IPs will be accepted.

– Sebi has mandated that algo providers be empanelled with exchanges. If a trader uses an algo provided by a vendor or a fintech firm, that entity must be empanelled with exchanges. Brokers will also have to ensure that all steps are followed during the process.

– Brokers will have to maintain details of all algo activity, including time, price, quantity, ID, and other information. For API sessions, mandatory two-factor authentication (2FA) and a password expiry policy will be required. Additionally, there should be an automatic session logout system each day. If a client does not meet these criteria, brokers will not be allowed to onboard new API clients.

6. New mutual fund rules: Sebi has notified revamped Mutual Fund Regulations. The regulator has introduced a revised structure for expenses, sharper disclosure requirements, and strengthened governance norms for fund houses.

Under the new framework, Sebi has introduced the concept of a Base Expense Ratio (BER). This will represent only the fee charged by an AMC for managing funds.

AMCs will now have to separately disclose other levies, such as brokerage, STT, stamp duty, and exchange fees. Earlier, these costs were aggregated under the Total Expense Ratio (TER). Additionally, Sebi has expanded the responsibilities of trustees and key managerial personnel of AMCs by tightening oversight and reinforcing governance standards.