SEBI Introduces New Evaluation Guidelines for Market Infrastructure Institutions

Introduction

In a move to strengthen governance across India’s financial market ecosystem, the Securities and Exchange Board of India (SEBI) has introduced a set of new guidelines for evaluating statutory committees within Market Infrastructure Institutions (MIIs). Effective from the 2024–2025 financial year, these measures aim to enhance transparency, accountability, and institutional performance.

What Are Market Infrastructure Institutions (MIIs)?

MIIs are foundational pillars of India’s financial system. They include:

• 🏛️ Stock exchanges (e.g., NSE, BSE)
• 🔄 Clearing corporations
• 📦 Depositories (e.g., NSDL, CDSL)

These entities facilitate the allocation and reallocation of capital, playing a vital role in market stability, investor trust, and economic growth.

Purpose of the New Guidelines

SEBI’s latest initiative seeks to:

• Ensure that MIIs uphold high governance standards
• Evaluate the roles and responsibilities of statutory committees
• Measure the effectiveness of meetings and overall governance practices

By mandating external and internal evaluations, SEBI aims to foster continuous improvement within these institutions.

External Evaluation Framework

Under the new rules:

• MIIs must appoint an independent external agency every three years
• The agency must:
  • Have relevant expertise in securities markets
  • Be free from conflicts of interest

📊 Evaluation Criteria and Weightage:

• Roles and responsibilities: 40%
• Effectiveness of meetings: 30%
• Governance practices: 30%

📅 The first external evaluation will cover the FY 2024–2025, with reports due by September 30, 2025.

Internal Evaluations: An Annual Requirement

In addition to external assessments, MIIs are required to:

• Conduct annual internal evaluations
• Submit reports to their Governing Board within three months of the financial year-end

This dual-layered approach ensures ongoing performance tracking and self-regulation.

Implementation Timeline and Review Cycle

• 🟢 First Evaluation Period: Financial Year 2024–25
• 📅 Submission Deadline: September 30, 2025
• 🔁 Review Frequency: Every three years (external), annually (internal)

Why This Matters: Strengthening the Financial Backbone

The functioning of MIIs has direct implications for:

• Market integrity and efficiency
• Investor protection
• The overall health of the financial system

Any systemic failure in MIIs could ripple into the broader economy. SEBI’s new guidelines aim to prevent such risks by embedding strong governance from within.

List of Key MIIs in India

Entities designated as MIIs include:

• 📈 Stock Exchanges:
  • Bombay Stock Exchange (BSE)
  • National Stock Exchange (NSE)
• 📦 Depositories:
  • Central Depository Services Ltd. (CDSL)
  • National Securities Depository Ltd. (NSDL)
• ✅ Clearing Corporations (7 recognized entities) responsible for trade finalization and validation

Conclusion

SEBI’s new guidelines mark a pivotal step toward building a resilient, transparent, and accountable market infrastructure in India. With structured evaluations and independent oversight, MIIs are better positioned to serve investors and support the country’s economic and financial stability.