Description

SEBI introduces amendments to strengthen governance of Stock Exchanges, Clearing Corporations and Depositories through enhanced roles for Managing Directors, Executive Directors, CTOs and CISOs.

Summary

SEBI has issued comprehensive amendments to strengthen governance of Market Infrastructure Institutions (MIIs) - Stock Exchanges, Clearing Corporations and Depositories. The circular implements changes to SECC Regulations 2018 and D&P Regulations 2018, approved by SEBI Board on September 12, 2025. Key provisions include mandatory appointment of Executive Directors for two verticals (Critical Operations and Regulatory/Compliance), enhanced reporting structures, and specific roles for CTOs and CISOs. The amendments come into force on December 20, 2025.

Key Points

  • Two Executive Directors (EDs) must be appointed for Vertical 1 (Critical Operations) and Vertical 2 (Regulatory, compliance, risk management and investor grievances)
  • EDs of both verticals will be members of the Governing Board of MIIs
  • Appointment through open advertisement in national daily required
  • At least two names to be forwarded to SEBI for approval without order of preference
  • EDs’ compensation requires prior SEBI approval and cannot be changed without SEBI consent
  • Public Interest Directors (PIDs) must ensure annual performance evaluation of EDs similar to MD evaluation
  • Standing Committee on Technology (SCOT) to hold separate quarterly meetings with ED of Vertical 1 without MD presence
  • Both EDs report to Managing Director for all purposes
  • Amendments issued via Gazette Notifications SEBI/LAD-NRO/GN/2025/276 and SEBI/LAD-NRO/GN/2025/275 dated November 21, 2025

Regulatory Changes

Amendments to SECC Regulations 2018 and D&P Regulations 2018:

  1. Executive Director Structure: Mandatory appointment of two EDs covering distinct operational verticals with Board membership

  2. Recruitment Process: Open advertisement requirement in national daily for ED positions with minimum qualification and experience standards

  3. SEBI Approval Mechanism: MIIs must submit at least two candidates per ED position to SEBI for approval along with compensation details

  4. Governance Oversight: PIDs responsible for annual performance evaluation of EDs using mechanisms similar to MD assessment

  5. Reporting Independence: SCOT to conduct separate quarterly meetings with Vertical 1 ED without MD presence for independent assessment

  6. Exemption Provision: MIIs facing genuine practical difficulties may seek case-by-case exemptions from SEBI considering size, financial health, and growth stage

Compliance Requirements

For All MIIs (Stock Exchanges, Clearing Corporations, Depositories):

  1. Immediate Actions: Prepare for appointment of two Executive Directors by December 20, 2025 effective date

  2. Recruitment Process:

    • Publish open advertisements in all editions of at least one national daily
    • Ensure applicants have adequate experience and qualification for respective verticals
    • Forward minimum two names per ED position to SEBI without preference ranking

  3. Compensation Approval: Seek SEBI approval for ED compensation terms at time of appointment submission

  4. Succession Planning: Submit replacement ED names to SEBI at least two months before existing ED’s last working day

  5. Performance Management: PIDs must establish annual performance evaluation mechanism for EDs

  6. Governance Structure: Ensure both EDs are included as Governing Board members

  7. Reporting Lines: Establish clear reporting structure with both EDs reporting to MD

  8. SCOT Meetings: Schedule separate quarterly meetings between SCOT and Vertical 1 ED

  9. Exemption Applications: MIIs unable to comply may apply to SEBI with justification based on size, financial health, or growth stage

Important Dates

  • September 12, 2025: SEBI Board approval of amendments
  • November 21, 2025: Gazette Notifications issued (SEBI/LAD-NRO/GN/2025/276 and SEBI/LAD-NRO/GN/2025/275)
  • December 12, 2025: Circular issued
  • December 20, 2025: Amendments come into force (30 days from Gazette publication)
  • Ongoing: At least two months before existing ED’s last working day - deadline for submitting replacement names to SEBI
  • Quarterly: SCOT separate meetings with Vertical 1 ED
  • Annual: Performance evaluation of EDs by PIDs

Impact Assessment

Market Infrastructure Impact: Fundamental governance restructuring affecting all recognized Stock Exchanges, Clearing Corporations and Depositories in India. The bifurcation of executive leadership into two distinct verticals creates checks and balances in critical operations and regulatory compliance functions.

Operational Impact: MIIs must establish dual executive leadership structure with independent oversight mechanisms. The requirement for separate SCOT meetings with Vertical 1 ED without MD presence introduces additional operational independence in technology governance. Recruitment and approval timelines require advance succession planning.

Compliance Burden: Substantial compliance requirements including mandatory recruitment processes, SEBI approval mechanisms, performance evaluation frameworks, and compensation approval processes. Smaller or newer MIIs may face challenges requiring exemption applications.

Governance Enhancement: Significant strengthening of MII governance through mandatory Board-level representation of both EDs, independent performance assessment by PIDs, and structured oversight by SCOT. Enhanced accountability framework for critical operations and regulatory functions.

Systemic Significance: Recognizes growing importance of MIIs given phenomenal market growth in capitalization, trading volumes, technology adoption and investor base. Strengthened governance aims to prevent lapses that could adversely impact securities markets and broader economy.

Industry Response: MIIs have limited time (8 days from circular date) to prepare for December 20, 2025 implementation. Case-by-case exemption provision provides flexibility for institutions facing genuine difficulties while maintaining overall governance standards.

Impact Justification

Fundamental governance changes for all Market Infrastructure Institutions affecting Stock Exchanges, Clearing Corporations and Depositories with mandatory structural and reporting requirements effective December 20, 2025