SEBI Mandates Two Executive Directors to Strengthen Market Infrastructure Institutions (MIIs)

Context:

The Securities and Exchange Board of India (SEBI) has notified a comprehensive leadership and governance framework for Market Infrastructure Institutions (MIIs)—including stock exchanges, clearing corporations and depositories—to strengthen oversight, accountability and risk management.

What Are MIIs?

MIIs are systemically important entities that provide the core infrastructure for capital markets, such as:

• Stock exchanges
• Clearing corporations
• Depositories

They play a critical role in ensuring market integrity, investor protection and financial stability.

Key Features of the New SEBI Framework

Mandatory Appointment of Two Executive Directors (EDs)

SEBI has mandated that every MII must appoint:

• ED (Critical Operations): Responsible for core operational functions
• ED (Regulatory, Compliance & Risk): Responsible for regulatory compliance, risk management and investor grievance redressal

Both EDs will be full-time and will sit on the governing board of the MII.

Transparent Appointment Process

• Appointments must be made through open advertisements in national newspapers
• MIIs must submit at least two candidates per position to SEBI
• Proposed compensation packages must be disclosed upfront
• Any change in remuneration requires prior board approval

Strengthened Reporting and Oversight

• Both EDs will report to the Managing Director (MD)
• Public Interest Directors (PIDs) will oversee annual performance evaluations
• EDs may escalate issues directly to SEBI when required
• MIIs must initiate appointments well before the end of an ED’s tenure to ensure continuity

Revised Internal Reporting Structure

• Department heads, including the CTO, CISO, Compliance Officer and Chief Risk Officer, will report to their respective EDs instead of the MD
• Statutory committees will continue to engage independently with key managerial personnel at least once every quarter