The Securities and Exchange Board of India (SEBI) has proposed measures for strengthening the governance framework for market infrastructure institutions (MIIs) including exchanges, depositories and clearing corporations.

The regulator has suggested the appointment of two executive directors (EDs) to the governing board; one for the critical operations vertical and the other for the regulatory, compliance and risk management vertical.

It has also outlined the broad roles and responsibilities of the managing director (MD), the proposed EDs, and specific KMPs such as the Chief Technology Officer (CTO) and Chief Information Security Officer (CISO).

Citing a rapid increase in investor base and volumes, and a growing network of intermediaries associated with the MIIs, the regulator said these entities play a vital role as first-line regulators and public utilities serving the cause of capital formation.

“The proposed steps aim to further ensure that MIIs accord highest priority to public interest, technology and operations, and risk and compliance, over commercial considerations,” SEBI said in a draft paper, inviting public comments by July 15.

Tighter governance

Under the proposed changes, MIIs will have their functions divided into three verticals: Critical operations to deal with trading, clearing & settlement, securities holding; regulatory, compliance, risk management, and investor grievances; and finally other functions, including business development.

Currently, the MD holds overall authority for all three functions and serves on the governing board. Having EDs on the governing board will ensure timely addressing of concerns related to critical operations and regulatory compliance, as well as avoid an authority gap between the MD and other KMPs.

The regulator has also suggested that the MD may be permitted to be appointed as a non-executive director on the board of a company in a not-for-profit or unlisted public body that is not involved in any commercial activity. Currently there are no norms on external directorships of MDs. However, the EDs shall not serve on the board of any other company, except for a subsidiary of the MII.

Published on June 24, 2025