Sebi releases uniform framework for evaluation of stock exchanges, other MIIs

Ensuring the equitable and transparent operation of the Indian securities market is a major responsibility of the Securities and Exchange Board of India (SEBI). To safeguard investor interests and preserve market integrity, it is in charge of regulating and overseeing many organizations, including stock exchanges, brokers, merchant bankers, and other intermediaries. In addition, SEBI creates rules and policies to support capital formation, improve market transparency, stop fraud, and educate investors. The mission of SEBI is to promote confidence in the Indian financial markets and level the playing field for all players by enforcing stringent compliance standards and keeping an eye on market activity. Generally speaking, the regulatory oversight that SEBI provides is essential to maintaining the effectiveness and stability of the Indian securities and commodities markets, which in turn promotes the country’s overall economic expansion. The market regulator, Sebi, released guidelines on Tuesday regarding the parameters that independent external agencies will use to evaluate the performance of market infrastructure institutions (MIIs), which include depositories, clearing corporations, and stock exchanges.

Parameters set by SEBI for the performance evaluation of MIIs:

On Tuesday, SEBI announced that it had released guidelines on the parameters for the performance evaluation of market infrastructure institutions (MIIs), which include stock exchanges, clearing corporations, and depositories. These guidelines are intended to guarantee uniformity and consistency in the assessments carried out by impartial outside organizations.

Primary 7 criteria according to SEBI:

Technology resilience (40%), investor education (17%), regulatory compliance (15%), governance practices (8%), and five percent each for adequate resources, equitable treatment of all stakeholders, and information disclosure are the seven main criteria for the performance evaluation, according to Sebi.

MIIs conduct a three-year performance evaluation:

Every three years, MIIs are expected to designate impartial outside organizations to assess their performance. According to a circular from Sebi, the regulator, the agencies must have the necessary experience in the securities market and obtain a “No Objection Certificate” (NOC). The financial year 2024-2025 will be the subject of the first independent evaluation, and the report is due on September 30, 2025. Every three years, there will be more assessments.

Managing Directors (MDs) and Key Management Personnel (KMPs) of market infrastructure institutions (MIIs) will also be evaluated, according to Sebi, with a significant portion of their performance review based on regulatory, risk management, and compliance outcomes. Thirty days after this circular is issued, its terms will come into force, and MIIs will need to make the necessary arrangements to put them into practice. In its June meeting, the Sebi board adopted the guidelines for the impartial external evaluation of MIIs’ performance.

Conclusion: The purpose of SEBI’s performance evaluations of MDs, MIIs, and key management personnel is to ensure greater transparency. These evaluations are conducted every three years.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.