SEBI Proposes Allowing Market Infrastructure Institutions to Undertake Certain Activities Without Prior Approval

The Securities and Exchange Board of India has proposed amendments to the Securities Contracts (Regulations) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and the Depositories and Participants Regulations, 2018 to undertake certain activities related to their core functions without prior SEBI approval, subject to specified conditions.

Under the existing framework, MIIs need prior SEBI approval for fund deployment and investments, except for certain treasury investments under a Board-approved policy, increasing the approval burden on the Market Infrastructure Institutions.

Under the proposed framework, MIIs, except recognised clearing corporations, may undertake eligible activities without prior SEBI approval through two routes- activities related or incidental to their securities-market functions, and similar activities carried out through companies regulated by another financial-sector regulator in India.

The regulator has further proposed that the aggregate fund deployment under the automatic route must not exceed the lower of 5% of the MII's net worth as of March 31 of the preceding financial year or the regulatory minimum net worth. The MII's net worth after deployment must also remain at least 1.5 times the minimum net worth prescribed by SEBI.

The proposal also requires MIIs to follow governance safeguards, including arm's-length arrangements for sharing logos, brands and resources, measures to prevent conflicts of interest, prior Board approval for each new activity or fund deployment, adequate resources for technological upgrades and regulatory compliance, and Board-approved Standard Operating Procedures. MIIs must also submit half-yearly reports to their Boards on activities undertaken under the automatic route.

Public comments have been invited by the regulator until November 12, 2026.