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SEBI on strengthening of MIIs

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  • Published
    17th Nov, 2022


Recently, a SEBI panel has recommended measures for strengthening the role played by the governing board, committees of stock exchanges with other market infrastructure institutions (MIIs) for countering the loopholes in their functioning.

What are Market Infrastructure Institutions?

  • Stock exchanges, depositories and clearing houses are all Market Infrastructure Institutions and constitute a key part of the nation's vital economic infrastructure. 


Key highlights of the recommendations:

  • Ensure Transparency and Accountability: After viewing the situation, it has recommended steps to enhance accountability and transparency and reviewed the policy on safekeeping and sharing of information held by MIIs.
  • Code of Conduct to be improved: It also advised to revisit the code of conduct and code of ethics for directors of the governing board and key managerial persons (KMPs) activities.
  • Working of Boards: It suggested that to ensure greater independence of the board of the MII, at least two-third members of the board of the MII shall comprise of Public Interest Directors (PIDs).
    • The existing process of appointment of Public Interest Directors (PIDs), non-independent directors and managing director should be rationalised by mapping certain expertise to PIDs while maintaining an overall balance of expertise required in the board.
  • Divided among categories: Under the proposal, the functions of MIIs should be categorised into three verticals
    • Critical operations;
    • Regulatory, compliance and risk management; and
    • Other functions including business development.
  • Ensure Right to be informed: In order to enhance transparency, the MIIs should disclose the agenda and minutes of meetings of their board, keeping in mind their role as a 'first-level regulator'.
    • Video and audio recordings of the meetings of the board of the MII should be made mandatory.
  • Assigning higher positions and powers: The definition of KMPs should be changed to cover employees based on importance of activities carried out by them and their relative hierarchy within the MII. Further, the MII must clearly segregate the roles and responsibilities of such KMPs.

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

  • Among stock exchanges, the SEBI lists seven, including the BSE, the NSE, the Multi Commodity Exchange of India and the Metropolitan Stock Exchange of India.
  • There are two depositories — charged with the safekeeping of securities and enabling their trading and transfer — that are tagged MIIs:
    • Central Depository Services Ltd.
    • National Securities Depository Ltd.
  • The regulator also lists seven clearing houses including the Multi Commodity Exchange Clearing Corporation. Clearing houses, for their part, help validate and finalise securities trades and ensure that both buyers and sellers honour their obligations.

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