01 Read
What happened
SEBI has proposed governance reforms for Market Infrastructure Institutions, including stock exchanges, clearing corporations, and depositories. The consultation paper recommends relaxing director eligibility criteria to expand the candidate pool for MII boards and introducing standardised operating procedures for key management personnel. The proposals aim to strengthen oversight, reduce conflicts of interest, and bring more professional diversity to MII governance structures. Public comments have been invited before these proposals are formalised into regulatory amendments.
02 Understand
Why it matters
Market Infrastructure Institutions are the backbone of India's securities market — stock exchanges like NSE and BSE, clearing corporations, and depositories like CDSL and NSDL. SEBI regulates them under the Securities Contracts (Regulation) Act, 1956 and the SEBI Act, 1992, with specific governance requirements embedded in the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, commonly called SECC Regulations.
The governance architecture of MIIs is uniquely sensitive because these institutions are simultaneously self-regulatory organisations and commercial entities. This dual role creates inherent conflicts of interest — exchanges regulate their own members while competing for their business. SEBI's framework therefore mandates that MII boards have a majority of independent directors, with a Public Interest Director (PID) category designed to represent the broader market.
The current proposal addresses two pressure points. First, the eligibility criteria for directors — especially PIDs — have been seen as too restrictive, limiting the talent pool. Relaxing these rules could bring in domain experts from technology, law, risk management, and academia. Second, the absence of standardised SOPs for key officials like the MD & CEO creates inconsistency in operational accountability.
For exam purposes, understand that SEBI's governance of MIIs is distinct from its governance of listed companies under LODR Regulations. MIIs have their own regulatory track — the SECC Regulations — and the conflict-of-interest architecture, director category definitions, and ownership norms are tested as separate provisions.
The governance architecture of MIIs is uniquely sensitive because these institutions are simultaneously self-regulatory organisations and commercial entities. This dual role creates inherent conflicts of interest — exchanges regulate their own members while competing for their business. SEBI's framework therefore mandates that MII boards have a majority of independent directors, with a Public Interest Director (PID) category designed to represent the broader market.
The current proposal addresses two pressure points. First, the eligibility criteria for directors — especially PIDs — have been seen as too restrictive, limiting the talent pool. Relaxing these rules could bring in domain experts from technology, law, risk management, and academia. Second, the absence of standardised SOPs for key officials like the MD & CEO creates inconsistency in operational accountability.
For exam purposes, understand that SEBI's governance of MIIs is distinct from its governance of listed companies under LODR Regulations. MIIs have their own regulatory track — the SECC Regulations — and the conflict-of-interest architecture, director category definitions, and ownership norms are tested as separate provisions.
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