Recent SEBI Changes 2026: Derivatives, Demat 2.0, GARUDA & Transmission Rules

Recent SEBI Changes 2026: Derivatives, Demat 2.0, GARUDA & Transmission Rules

SEBI has introduced and proposed several important reforms in 2026 covering derivatives expiry-day settlement, tokenised corporate bonds through Demat 2.0, cybersecurity reporting, faster AIF launches through GARUDA, and simpler transmission of securities after an investor’s death. These measures broadly aim to improve market efficiency, strengthen investor protection, modernise infrastructure and reduce unnecessary compliance and documentation burdens.

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For retail and emerging investors, regulatory changes can sometimes appear technical. However, they can directly affect how trades are settled, how securities are held, how investment platforms protect data, how alternative investment funds are launched and how investments are transferred to legal heirs.

Here are five recent SEBI developments investors should understand.

1. What is SEBI proposing for stock derivatives expiry-day settlement?

One of the most closely watched recent developments concerns the Closing Auction Session (CAS) and its impact on the settlement price of index and single-stock derivatives.

SEBI introduced CAS in the equity cash segment from August 3, 2026. Following feedback from market participants, the regulator has now issued a September 12, 2026 consultation paper reviewing aspects of CAS, including the methodology used to determine settlement prices for derivative contracts on expiry days. Importantly, these are proposals for public consultation and not yet final rules.

SEBI has proposed two alternatives for determining expiry-day derivative settlement prices:

Option 1: Blended VWAP

Under the proposed blended approach, the settlement price would incorporate:

• Trades during the last 30 minutes of the Continuous Trading Session (CTS); and
• Trades during the 10-minute Closing Auction Session.

The contribution of each period would depend on its actual traded value rather than using a predetermined fixed weight.

Option 2: Continue with the existing CTS VWAP

The second proposal is to continue using the existing methodology based on the volume-weighted average price during the final 30 minutes of continuous trading.

SEBI has suggested that this could be retained for at least a year while market participants become more familiar with CAS and liquidity develops before considering a transition to a blended methodology.

Why does this matter to retail traders?

Expiry-day settlement prices can significantly influence the final profit or loss on futures and options positions. Therefore, a change in the methodology used to calculate settlement prices can affect traders who hold positions until expiry.

For investors, the key lesson is simple: the price displayed during the final minutes of trading and the eventual derivative settlement price need not necessarily be identical.

SEBI is also considering changes to order handling, CAS timings and dissemination of indicative prices, with the objective of improving price discovery and reducing the possibility of excessive volatility or misleading signals during the auction period.

Investors should therefore avoid treating the current consultation proposals as final rules until SEBI issues a definitive decision.

2. What is SEBI’s Demat 2.0 and how could tokenised corporate bonds change investing?

On September 10, 2026, SEBI and the Reserve Bank of India (RBI) announced the launch of Demat 2.0, a pilot project for tokenised corporate bonds.

The initiative tests whether corporate bonds can be issued, held, traded and settled using Distributed Ledger Technology (DLT).

In simple terms, instead of recording ownership only through conventional dematerialised infrastructure, the pilot represents the bond as a digital token on a permissioned distributed ledger operated by market infrastructure institutions.

The system is connected to RBI’s wholesale Central Bank Digital Currency (CBDC), or e₹, through the Unified Market Interface. This can enable atomic settlement, meaning the securities and corresponding money legs can be settled together.

Three issuers had already issued tokenised bonds totalling ₹1,025 crore when the pilot was announced:

• REC Limited – ₹500 crore
• L&T Limited – ₹500 crore
• IIFL – ₹25 crore.

Does Demat 2.0 create a new type of bond?

No.

This is an important distinction for investors. The technology used to record ownership and settle transactions changes, but the underlying corporate bond retains its legal character, investor rights and applicable safeguards.

Credit ratings, debenture trustees, disclosures, listing requirements and other regulatory protections continue to apply.

The pilot is being implemented in phases. Future phases are expected to explore secondary-market transactions through existing RFQ platforms and eventually access for retail investors. Therefore, Demat 2.0 should not currently be interpreted as a broad retail tokenised-bond platform.

For investors, the larger significance is that India is testing whether securities ownership, settlement and asset servicing can become more automated and efficient without changing the fundamental legal rights attached to the security.

3. What changed under SEBI’s Cybersecurity and Cyber Resilience Framework?

Cybersecurity has become increasingly important as stock-market participation, online broking, demat accounts and digital financial services expand.

SEBI’s Cybersecurity and Cyber Resilience Framework (CSCRF) provides a consolidated framework for cybersecurity and resilience across SEBI-regulated entities.

One important clarification is necessary regarding the word “extension.” SEBI’s specific extensions of the CSCRF implementation timeline were issued in March and June 2025, rather than in 2026.

In March 2025, SEBI extended the compliance timeline for applicable regulated entities to June 30, 2025, with certain entities such as Market Infrastructure Institutions, KYC Registration Agencies and Qualified RTAs treated differently. A further extension in June 2025 moved the applicable deadline to August 31, 2025.

SEBI subsequently issued technical clarifications in August 2025.

What is relevant in 2026?

SEBI continues to strengthen the operational cybersecurity ecosystem. In August 2026, it launched the Cyber Suraksha Portal, described as a centralised hub for cybersecurity knowledge, advisories, threat intelligence and security-incident information for the securities market.

SEBI also issued an August 24, 2026 circular aligning its cyber-incident reporting portal with the FIRE format, further modernising incident reporting.

What does this mean for investors?

Retail investors may not directly implement CSCRF controls, but they benefit from stronger cybersecurity requirements imposed on brokers, exchanges, depositories, intermediaries and other regulated entities.

Investors should nevertheless continue to follow basic precautions:

• Never share OTPs, passwords or trading credentials.
• Use strong and unique passwords.
• Enable available two-factor authentication.
• Verify communications claiming to be from brokers or exchanges.
• Avoid clicking unknown links.
• Monitor demat and trading-account activity regularly.

Cybersecurity regulation reduces systemic and operational risks, but it does not eliminate the possibility of fraud or account compromise.

4. What is the GARUDA mechanism for Alternative Investment Funds?

SEBI introduced the GARUDA — Green-Channel: AIF Rollout Upon Document Acknowledgement — mechanism on July 30, 2026. The objective is to make the launch of Alternative Investment Fund (AIF) schemes faster while retaining disclosure and due-diligence responsibilities.

For regular AIF schemes, the new framework allows the scheme to be launched after 10 working days from filing the Placement Memorandum (PPM) with SEBI, unless SEBI advises otherwise. For a first scheme, launch can take place from the date of SEBI registration or after 10 working days from filing, whichever is later.

The framework also gives additional flexibility to:

• Accredited Investor-only funds;
• Large Value Funds for Accredited Investors (LVFs); and
• Angel Funds.

AI-only funds and LVFs can launch their schemes immediately upon filing their PPM, subject to the applicable framework, while Angel Funds can circulate their PPM after registration under the revised provisions.

Does faster approval mean lower investor protection?

Not necessarily.

The framework shifts the regulatory process towards greater reliance on due diligence, disclosures, certifications and post-facto scrutiny rather than requiring the same level of upfront processing.

For regular schemes, the merchant banker remains responsible for prescribed due diligence, while the AIF manager remains responsible for the accuracy and completeness of disclosures.

Most importantly, submission of a PPM to SEBI should not be interpreted as SEBI approval or endorsement of the fund’s investment strategy or performance.

For investors considering an AIF, reading the PPM, understanding the strategy, fees, risks, liquidity provisions and conflicts remains essential.

5. How has SEBI simplified transmission of securities after an investor’s death?

SEBI’s July 23, 2026 circular introduced a revised and standardised framework for transmission of securities following the death of the sole holder or all joint holders.

One of the important changes is the introduction of Quick Transmission Processing (QTP) for low-value claims.

The QTP threshold is:

Type of holding	QTP threshold
Physical securities	Up to ₹10,000
Dematerialised securities	Up to ₹30,000

SEBI also increased the thresholds for the broader simplified-documentation route to ₹10 lakh for physical securities and ₹30 lakh for dematerialised holdings, subject to the applicable conditions.

The revised framework also introduces several documentation simplifications, including acceptance of QR-code-enabled death certificates, a combined affidavit-cum-No Objection Declaration and removal of the mandatory requirement for probate of a will in the specified framework.

Processing entities are expected to follow standardised forms and procedures, with a prescribed timeline for processing complete claims.

Why does this matter to retail investors?

Transmission is different from a normal transfer.

It generally occurs when securities move to a surviving joint holder, nominee or legal heir following the death of the investor. A smoother transmission framework can reduce administrative difficulties for families at an already difficult time.

This also highlights the importance of keeping nomination details updated and ensuring that family members know where investment records are maintained.

What do these five SEBI developments mean for investors?

Taken together, these measures show five broad regulatory priorities:

SEBI development	Main objective	Investor relevance
Derivatives expiry settlement review	Improve price discovery	May affect expiry-day F&O settlement
Demat 2.0	Modernise securities infrastructure	Potentially faster and more automated bond settlement
CSCRF & cyber initiatives	Strengthen cyber resilience	Better protection of market infrastructure and investor data
GARUDA	Faster AIF scheme launches	More efficient fund deployment, but due diligence remains important
Transmission reforms	Simplify succession procedures	Easier transfer of investments to eligible claimants

For retail investors, the common theme is market infrastructure becoming faster, more technology-driven and more standardised.

However, regulatory reform does not remove investment risk. A faster settlement mechanism does not make derivatives safer, tokenisation does not eliminate credit or liquidity risk in bonds, and a faster AIF launch does not guarantee returns.

Conclusion

SEBI’s recent reforms demonstrate how India’s securities market is evolving across trading, settlement, technology, cybersecurity, alternative investments and investor servicing.

For retail investors, the most immediate development to watch is the review of expiry-day derivative settlement methodology following the introduction of CAS. Demat 2.0 is important from a longer-term market-infrastructure perspective, while GARUDA and transmission reforms focus on improving efficiency. Cybersecurity initiatives, meanwhile, recognise that a highly digital securities market requires stronger resilience and incident-response capabilities.

The key takeaway is that regulatory changes can alter the way markets function, but they do not eliminate investment risk. Investors should therefore understand the rule change, distinguish between proposals and final regulations, and make investment decisions based on their own objectives, risk tolerance and due diligence rather than assuming that a regulatory reform makes an investment opportunity safer or more profitable.

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Official Sources

• SEBI — Consultation Paper on Closing Auction Session, Market Timings and Derivative Settlement Methodologies
• SEBI — Demat 2.0 FAQs / Tokenised Corporate Bonds
• SEBI — Cybersecurity and Cyber Resilience Framework Extension, June 2025
• SEBI Cyber Suraksha Portal
• SEBI — GARUDA Mechanism for AIFs
• SEBI — Transmission of Securities Framework, July 2026

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What Is the Closing Auction Session (CAS) & How Did It Impact NSE’s Closing Yesterday?
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Maximizing Returns: A Guide to Alternative Investment Funds
How Do Regulatory Changes Affect Business Models Across Different Indian Industries?
NSE F&O Rule Changes and Expiry Updates: What Traders Need to Know in August 2026

Disclaimer: This blog post is intended for informational purposes only and should not be considered financial advice. The financial data presented is subject to change over time, and the securities mentioned are examples only and do not constitute investment recommendations. Always conduct thorough research and consult with a qualified financial advisor before making any investment decisions.