SEBI Proposes Overhaul Of STP Messaging Framework To Reduce Delays, Costs

The Securities and Exchange Board of India (SEBI) has proposed changes to its Straight Through Processing (STP) framework for institutional trades, aiming to reduce delays, lower costs, and improve service delivery for market participants.

The market regulator on Monday issued a consultation paper proposing a shift from the existing centralized STP messaging framework to a direct Application Programming Interface (API)-based system for communication between STP Service Providers (SSPs).

The STP framework is the electronic system used for automated end-to-end processing of financial instrument transactions and exchange of trade-related messages, including Electronic Contract Notes, between stock brokers, custodians, and institutional investors.

SEBI said the current framework requires messages between different SSPs to be routed through a centralized STP Hub. Under this system, stock brokers send messages through a sender SSP, while custodians and institutional investors receive them through a receiver SSP.

According to SEBI, this architecture increases transmission time and costs because messages between different SSPs have to pass through the hub. The regulator noted that between April 1, 2025 and December 31, 2025, about 95%-99% of STP messages were routed through a single SSP, creating concentration risk and the possibility of a single point of failure.

To address these concerns, SEBI has proposed replacing the centralized hub for message transfers between SSPs with a direct API-based framework.

Under the proposed model, SSPs would exchange messages directly through standardized API endpoints instead of routing them through the hub.

“This would also enhance scalability and cost-effectiveness of STP framework while supporting the transaction volumes of institutional trading,” SEBI said.

The regulator said the proposed framework would not require system changes for STP users such as stock brokers, institutional investors, and custodians, while likely encouraging more SSPs to participate.

SEBI has also proposed an optional API-based message exchange facility for STP users serviced by the same SSP, aimed at reducing human errors and improving operational ease, alongside the existing upload and download mechanism.

The Industry Standard Forum of Market Infrastructure Institutions will prepare the standard operating procedure for SSPs and determine the operational modalities for the proposed framework in consultation with SEBI.

Public comments on the consultation paper have been invited till June 9, 2026.