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Need for reforms in Market Infrastructure Institutions

Published: 7th Mar, 2022


SEBI levying fine on NSE, its former M.D and CEO Chitra Ramkrihnan, her predecessor in NSE Ravi Narain and the Group Operating Officer of NSE Anand Subramanian.


  • Chitra Ramakrishna, in her capacity of being M.D. and C.E.O of NSE, appointed Anand Subramanian as the Group Operating Officer of the National Stock Exchange in an arbitrary manner without him possessing any experience for this job.
  • It is alleged that Ms. Ramakrishna appointed Mr. Subramanian on an advice given to her by a spiritual guru with whom she also shared confidential information from NSE.
  • SEBI taking cognisance of this incident fined all those mentioned above.
  • NSE was fined and censured by SEBI for not acting swiftly against Ms Ramakrishnan and other personnel involved in the incident even after getting complaints regarding the same.
  • This incident though has called in question the role of Market Infrastructure Institutions, their management and need for reforms in them.

What are MIIs?

  • Stock exchanges, depositories and clearing houses are all Market Infrastructure Institutions.
  • The primary function of this institutions is to provide a platform which makes working of capital markets possible in India.
  • MIIs are responsible for making capital markets accessible to investors including the retail investors.
  • It is also the duty of MIIs to oversee that the functioning of capital markets is carried on with due diligence and in fiduciary capacity to safeguard the interest of the investors.

What are the specific institutions in India that qualify as MIIs?

  • Stock Market in India that are registered with SEBI and they are as follows:
  • Bombay Stock Exchange Ltd
  • National Stock Exchange Ltd
  • Calcutta Stock Exchange Ltd
  • Indian Commodity Exchange Ltd
  • Metropolitan Exchange of India Ltd
  • Multi Commodity Exchange of India Ltd
  • National Commodity and Derivatives Exchange of India Ltd
  • Two depositories, namely:
  • Central Depository Services Ltd.
  • National Securities Depository Ltd.

What is a depository?

The above named depository function as banks. The only difference being that as banks holds the money of depositors, these depositories electronically store the financial securities of investors

  • And the seven clearing houses:
  • Indian International Clearing Corporation (IFSC) Limited
  • Indian Clearing Corporation
  • Metropolitan Clearing Corporation of India Limited
  • Multi Commodity Exchange Clearing Corporation Limited
  • National Commodity Clearing Corporation Limited
  • National Securities Clearing Corporation Limited (NSCCL)
  • NSE IFSC Clearing Corporation Limited

What is a Clearing House?

Clearing corporations, commonly known as clearing houses or clearing firms, are entities that are associated with stock exchanges constituted to act as a designated mediator between a buyer and a seller in a financial market. The primary function of a clearing house is validation and finalization of the transaction by ensuring that both – the seller and the buyer – honour their contractual obligations.

Why are they considered important?

  • Important of MIIs in India can be fathomed from the phenomenal growth that these institutions have witnessed in terms of market capitalisation of listed companies, capital raised and the number of investor accounts with brokers and depositories and the value of assets held in the depositories’ account.
  • It has to be though remembered that unlike the typical financial institutions (e.g. banks and NBFCs), the number of stock exchanges, depositories and clearing corporations in an economy is limited.

Why are governance norms critical in the regulation of MIIs?

  • Lapses in the functioning for these institutions for any reason e.g. technical glitch, misdeed or incapacity of their personnel etc. can result in catastrophic ramifications.
  • Any news for poor performance due to above mentioned or some other reason can result and has directly resulted in withdrawal for capital from India’s equity market, loss of valuable asset of the investors and mostly importantly the retail investors and loss of confidence in capital markets of India in the heart of both foreign and domestic investors.
  • Given the potential for a domino effect that a failure of an MII could have on the wider market and economy, governance and oversight are absolutely critical and need to be of the highest standards.

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