SEBI proposes a governance framework for market infrastructure institutions
Market regulator Securities and Exchange Commission India (SEBI) released a consultative document on Tuesday proposing measures to improve governance of market infrastructure institutions (MII), which include stock exchanges, clearing companies and depositors.
The consulting framework is designed to regulate the operation of entities such as the National Stock Exchange (NSE), the Mumbai Stock Exchange (BSE), the Central Deposit Services Limited (CDSL), and other clearing and deposit institutions.
As part of the proposed reform, SEBI recommends appointing two executive directors (EDs) to manage key areas of operations and regulatory oversight.
Specifically, the proposal calls for the appointment of two EDs, who will be designated as principal managers (KMPs) and will serve on the MII’s governing committee. One ED will lead “critical operations” while the other will be responsible for “regulation, compliance, risk management and investor dissatisfaction.”
SEBI stressed that the rapid expansion of the securities market – recurring in higher market caps, trading volumes, technological growth and a larger investor base – greatly increased the responsibility of MII as a major regulator. Therefore, strong governance is crucial, as any failure of these institutions can have a negative impact on financial markets and the broader economy.
Among the key recommendations, the Public Interest Directors (PID) chairpersons are required to major board committees. SEBI also recommends that all important board committees conduct independent assessments every three years to ensure their effectiveness and compliance.
The consulting document also recommends redefining the roles and responsibilities of managing directors (MD), executive directors (EDS), and other specific key managers, such as the Chief Operating Officer (COO), Chief Risk Officer (CRIO), Chief Technology Officer (CTO) (CTO) and Chief Information Security Officer (CISO).
The regulator notes that the recommendations are designed to ensure that the MII prioritizes the public interest, technical robustness and regulatory compliance rather than purely commercial goals.
