SEBI Implements New Guidelines for Market Infrastructure Institutions

January 31, 2025

The Securities and Exchange Board of India (SEBI) recently introduced guidelines aimed at enhancing the evaluation of statutory committees within Market Infrastructure Institutions (MIIs). This decision comes in response to the need for improved transparency and accountability in the functioning of these crucial entities. MIIs include stock exchanges, clearing corporations, and depositories. The guidelines mandate an independent external evaluation every three years, starting with the 2024-2025 financial year.

Purpose of the Guidelines

The primary goal of the guidelines is to ensure that MIIs operate with high standards of governance.
By requiring external evaluations, SEBI intends to assess the roles and responsibilities of committees.
This initiative also aims to gauge the effectiveness of meetings and overall governance practices.

Evaluation Process

Under the new framework, MIIs must appoint an independent external agency for evaluations.
This agency should have relevant experience in the securities market and must be free from conflicts of interest.
The evaluation will contribute 40% weightage to roles and responsibilities, while effectiveness of meetings and governance will each account for 30%.

Internal Evaluations

In addition to external evaluations, MIIs are required to conduct annual internal evaluations.
These reports must be submitted to the Governing Board within three months after each financial year.
This dual-layered evaluation process is designed to encourage continuous improvement within MIIs.

Timeline for Implementation

The first external evaluation is set to cover the financial year 2024-2025.
Reports from these evaluations must be submitted by September 30, 2025.
Subsequent evaluations will follow a three-year cycle, ensuring that MIIs are consistently monitored and assessed.

Importance of MIIs

MIIs play a critical role in the financial ecosystem of India. They facilitate the allocation and reallocation of capital, which is essential for economic growth. The stability and efficiency of MIIs are vital for investor confidence and overall market integrity. Any failure within these institutions could lead to economic repercussions.

Specific Institutions Designated as MIIs

Several entities qualify as MIIs in India. These include major stock exchanges like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The two depositories are the Central Depository Services Ltd. and the National Securities Depository Ltd. Additionally, there are seven recognized clearing houses that help validate and finalize securities trades.

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