Mumbai (Maharashtra) [India], 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.
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.
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