IFSCA Notifies New Market Abuse Regulations for Securities Market in Gift City

By Sneha

Introduction

The regulator responsible for overseeing India's GIFT City international financial services centre (IFSC) has formally notified a consolidated framework setting out rules of conduct in the securities markets. The IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026 bring together, for the first time, provisions relating to insider trading, fraudulent and unfair trading, and dissemination of misleading information under one regulatory instrument. The move represents a major milestone in the evolution of rules in GIFT City, which marks a shift towards creating bespoke rules for the IFSC as opposed to relying on rules crafted for the domestic securities market. The regulator has framed the new rulebook as an investor-protection measure, which it believes will provide market participants, exchanges and regulated intermediaries operating out of GIFT City with a clear set of expectations of fair conduct. As the IFSC attracts growing number of global banks, exchanges, funds and other financial institutions, a purpose-built market abuse regime is seen as a necessary step towards enabling the IFSC to be seen as a well-regulated centre that can host increasingly complex cross-border trading activity.

What the New Frame Work is Replacing

Before their rescission, conduct in the IFSC was primarily governed by two long-standing Sebi regulations: the Sebi (Prohibition of Insider Trading) Regulations, 2015, and the Sebi (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003. These were originally framed for India's domestic securities markets, and applied, with modifications, to the IFSC as well.

With the commencement of the IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026, both of the above Sebi regimes will cease to apply in the IFSC. Instead, a single consolidated set of regulations, administered directly by the IFSCA will apply to insider trading, fraud, and manipulative trading practices, affecting entities and persons dealing in GIFT City's securities markets. This change is not merely one of convenience; it reflects a shift in regulatory ownership: enforcement, interpretation, and future amendments to these rules will henceforth be the responsibility of the IFSCA, rather than being derived, in modified form, from Sebi's domestic regime. For market participants, it means a single point of reference in terms of market-conduct compliance, rather than needing to deal with two separate, older regulatory instruments.

 Key Prohibition Under New Regulation

At the heart of the new rules is a wide prohibition on conduct undermining fair and transparent price discovery. Fraudulent transactions, price and benchmark manipulation, creating artificial demand, and circular trading, or trading between connected counterparties to create the illusion of active trading, are all explicitly banned.

The rules also target spoofing behaviour – the placement of multiple buy or sell orders that are quickly cancelled in an attempt to artificially influence the price of a security. It is particularly notable that this is explicitly mentioned as a prohibited practice, as it reflects a recognition of the potential for abusive automated trading strategies and algorithms in the modern electronic trading environment, and represents an expansion of the rules beyond traditional manual market abuse.

Beyond direct price manipulation, the rules also prohibit the misuse of information and client relationships to manipulate the market. The dissemination of false or misleading information by any means, including digital and social media, is explicitly prohibited. Unauthorised transactions on behalf of clients, and more widely any artificial trading activity designed to distort genuine market activity are also banned.

Insider Trading Regulation

The regulations cover insider trading in great detail because it has been a matter of great regulation and concern for the securities market worldwide. According to the new laws, insider information sharing is prohibited with any other person, except for the exchange of information on proper grounds, as well as the performance of duties, and responsibilities for which a particular position is responsible. However, in most cases, these exceptions apply to international practice, since there is a need for specialists to perform their duties, which may involve disclosing the received information in the workplace.

In addition to the prohibition on insider information sharing, the regulations prohibit insider trading itself, as well as the use of such information for trading or inducing another person to make a transaction. According to the new rules, any transaction should be considered to have been carried out by an insider on the basis of insider information. Thus, the burden of proof that a particular transaction was not made on the basis of insider information falls on the person who made the transaction. At the same time, it should be noted that in other countries, similar insider trading laws contain a list of exceptions that can be used as proof that a particular transaction does not fall under the definition of insider trading.

The new laws allow for easier enforcement of insider trading regulations by shifting the burden of proof to the defendant. This is due to the fact that proving that a person made a trade on the basis of insider information requires more effort than proving the opposite. Thus, rather than placing the burden of proof on the regulator to specifically prove that the trader made the trade on the basis of insider knowledge, a transaction made by an insider was recognized as one that took place on the basis of insider information, thereby shifting the burden onto the trader.

Disclosure Requirement

The new framework also imposes certain disclosure obligations on designated persons. Controlling shareholders and directors of listed entities fall under this category. The latter are obliged to report any trades exceeding the specified quarterly threshold of 25,000 within two trading days of the transactions.

Listed entities, in turn, upon receiving such disclosure, are required to notify the exchanges and make the information available on their websites within two working days. Thus, a two-step disclosure process, starting from the designated persons and ending with listed entities, is designed to ensure that all market participants receive the necessary information within a reasonable timeframe.

Finally, listed entities are required to establish internal controls and a code of conduct that would help prevent market abuse. Such measures are intended to cover all aspects of insider dealing and are required to include policies concerning material non-public information, its distribution, and limits of its disclosure both internally and externally. In addition, internal controls encompass the identification of personnel with access to material non-public information and periodic assessments of the adequacy of the established procedures. Thus, listed entities are now obliged to operate under the constant threat of market abuse and take all necessary measures to prevent it rather than wait for an alleged abuse and respond accordingly.

Enforcement Mechanism

The rules grant the IFSCA a variety of enforcement tools to go after violations. As per the Act, the regulator can issue warnings or censures, and in extreme situations, it can suspend or cancel the registration of the entities or persons that it finds to be in breach of the rules.

This is not just talk – recently, the GIFT city regulator has ramped up its enforcement activity, going after alleged violators and taking such steps as imposing penalties and cancellations of registration. This is a sign that the IFSCA intends on using the new rules not merely as a statement of principle but to actually enforce market discipline within the IFSC. Market participants in GIFT City should thus treat the notice of the new regulations as more than a symbolic gesture – it is rather a sign that their behaviors will be closely monitored.

Conclusion

The notification on the IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026 represents a significant consolidation of rules relating to GIFT City's securities markets. By grouping together inside trading, fraudulent and manipulative practices and unfair dealings under an IFSC-specific framework, the IFSCA has moved away from a reliance on Sebi's domestic regulations towards creating its own.

The contents of the new rules point to an intent to address both 'traditional' issues like circular trading and dissemination of false information, as well as newer problems such as spoofing and use of digital media to affect market sentiment. The insider trading provisions, with the rebuttable presumption of informed trading, represent a move towards aligning GIFT City's regulatory standards with other established financial centres, while the disclosure requirements around designated persons bring in a degree of transparency to trading by people with access to price-sensitive information.

In conjunction with the IFSCA's demonstrated willingness to take up enforcement actions, this signals that GIFT City is positioning itself as a centre with credible, independent market-conduct oversight, a consideration for both domestic and international players looking to make an assessment of the depth and integrity of GIFT City as a securities market. The key takeaway for listed entities, insiders and other regulated persons operating within the IFSC is that compliance obligations under this new regime, spanning trading conduct, information handling and disclosure timelines, will need to be addressed promptly and internal processes put in place that reflect the standards this new framework demands.