SEBI issues consultation paper to boost governance of Market Infrastructure Institutions

ANI June 24, 2025 288 views

SEBI has introduced a consultation paper to enhance governance in Market Infrastructure Institutions like stock exchanges and depositories. The proposal includes appointing two executive directors for critical operations and regulatory oversight. Public interest directors will now lead major board committees, ensuring stricter compliance. These reforms aim to prioritize public interest over commercial gains in India's rapidly growing securities market.

"Any failure or misgovernance in these critical institutions could have an adverse impact on the securities market and the broader economy" – SEBI
Mumbai, June 24: Market regulator Securities Exchange Board of India (SEBI) on Tuesday issued a consultation paper on strengthening governance of the Market Infrastructure Institutions (MIIs) such as Stock Exchanges, Clearing Corporations, and Depositories.

Key Points

1

SEBI proposes two executive directors for critical operations and compliance

2

Public interest directors to chair key board committees

3

External assessments for committees every three years

4

Reforms target NSE, BSE, CDSL, and other MIIs

The framework of the consultation will regulate the functioning of the stock exchanges and other bodies such as the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), Central Depository Services Limited (CDSL), clearing corporations, among others.

According to the proposed consultation, the market regulator has proposed the appointment of two executive directors (EDs) for critical operations and Regulatory purepose.

"Mandating the appointment of two EDs, each heading 'Vertical 1: CriticalOperations" and "Vertical 2: Regulatory, Compliance, Risk Management, and Investor Grievances', as Key Management Personnel (KMPs) who will serve on the MII's Governing Board," the SEBI added in its consultation paper.

Expressing a need for two EDs, SEBI added that the phenomenal growth in the securities market over recent years, driven by increased market capitalisation, trading volumes, technology adoption, investor base, and market intermediaries, has significantly amplified the role of MIIs as first-line regulators.

"Any failure or misgovernance in these critical institutions could have an adverse impact on the securities market and the broader economy," the SEBI said.

As per the suggestions, one of the most significant adjustments is requiring public interest directors (PIDs) to serve as chair of significant board committees.

In addition, the market regulator added that all key committees should undergo an external assessment every three years, aimed at securing effectiveness and compliance.

The consultation paper also seeks to redefine the roles and responsibilities of MD, EDs, and Specific KMPs (CO, CRiO, CTO, and CISO).

In recent years, large MIIs such as Stock Exchanges, Clearing Corporations and Depositories have seen a rapid increase in investor base and volumes, and a growing network of intermediaries associated with them. Alongside, they have experienced significant growth in revenue and profitability, and they enjoy high profit margins.

In this context, given the vital role MIIs play as first-line regulators and public utilities in the cause of capital formation, this consultation paper outlines proposals aimed at strengthening the operational and governance framework of MIIs.

The market regulator stated in the consultation paper that the proposed steps aim to further ensure that MIIs accord the highest priority to public interest, technology and operations, and risk and compliance, over commercial considerations.

Reader Comments

R
Rahul K.
Finally SEBI is taking steps to strengthen governance! With so many new retail investors entering the market, we need stronger oversight. The two ED system makes sense - one for operations and one for compliance. Hope they implement this quickly. 🇮🇳
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Priya M.
Good move but will it be enough? After the NSE co-location scam, we need more than just structural changes. Regular external audits every 3 years is a positive step though. Hope they also focus on cybersecurity - that's the next big risk area for our markets.
A
Amit S.
As someone who works in fintech, I welcome these changes. The Indian markets have grown exponentially but governance hasn't kept pace. The focus on technology risk management is crucial - too many investors' data could be at risk otherwise. 👍
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Neha T.
While the intentions are good, I worry about over-regulation. Our markets have been doing well precisely because of innovation and flexibility. Hope SEBI finds the right balance between governance and not stifling growth. Too much red tape could push investors away.
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Sanjay V.
The part about public interest directors chairing key committees is most important. For too long, profit motives have dominated. Our markets should serve the nation's economic growth, not just corporate bottom lines. Jai Hind!
K
Kavita R.
As a small investor, I just want to know my money is safe. These changes sound promising but implementation is key. SEBI needs to ensure these rules are followed in spirit, not just on paper. More transparency in market operations will boost confidence.

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Tags:
SEBI Stock Exchange Governance NSE BSE CDSL Market Infrastructure Institutions Regulatory Reforms