In June 2025, the Securities and Exchange Board of India (SEBI) released a pivotal consultation paper titled “Strengthening Governance of Market Infrastructure Institutions (MIIs). This initiative reflects SEBI’s recognition of the evolving dynamics of India’s capital markets and the critical role MIIs — such as stock exchanges, clearing corporations, and depositories — play in maintaining a robust financial ecosystem. With rising investor participation, exponential growth in trading volumes, and expanding networks of intermediaries, it has become essential to reinforce the governance and operational structures of these institutions.
Over the past few years, MIIs have not only grown in size and complexity but have also become significantly profitable. Their high margins and increasing market power necessitate a reorientation of priorities — from a commercial outlook to a stronger focus on public interest, compliance, technology, and operational resilience. SEBI’s proposals in the consultation paper aim to embed these priorities more deeply into the governance DNA of MIIs.
The paper outlines three key reforms to achieve this:
- Mandatory Appointment of Two Executive Directors (EDs)
SEBI proposes that each MII appoint two Executive Directors to its Governing Board. These roles will be integral to the operational and regulatory functioning of the institutions. One ED will oversee “Vertical 1: Critical Operations,” while the other will head “Vertical 2: Regulatory, Compliance, Risk Management, and Investor Grievances.” These EDs will be designated as Key Management Personnel (KMPs) and embedded within the board structure to ensure stronger accountability and leadership in essential functional areas.
- Defined Roles and Responsibilities
Another major reform is the clear demarcation of roles for the Managing Director (MD), the two proposed EDs, and other important KMPs like the Chief Technology Officer (CTO) and Chief Information Security Officer (CISO). By formalizing these roles, SEBI aims to eliminate ambiguities and overlaps in responsibilities. This structure ensures that strategic oversight, technological robustness, cybersecurity, and investor protection remain central to the operations of MIIs.
- Norms on External Directorships
To avoid potential conflicts of interest, SEBI suggests implementing strict norms on directorships held by MDs and EDs of MIIs in other companies. This proposal seeks to preserve the integrity and independence of MII leadership by preventing undue influence or divided loyalties that could compromise regulatory or operational performance.
Together, these measures aim to foster a governance culture that places the public interest and market integrity above commercial objectives. Importantly, these steps will also support effective succession planning and reinforce leadership continuity in these vital institutions.
In conclusion, SEBI’s consultation paper is a proactive effort to align the governance framework of MIIs with the evolving needs of India’s capital markets. As the financial landscape becomes more complex and interconnected, strong internal governance, clear leadership roles, and a public-interest-driven mission are crucial for maintaining trust and stability. Stakeholder feedback on this paper will be instrumental in shaping the future of market infrastructure governance in India.
