The Securities and Exchange Board of India has issued a circular setting out operational requirements to implement recently amended rules aimed at strengthening governance at market infrastructure institutions (stock exchanges, clearing corporations and depositories). The measures focus on the appointment and board positioning of Executive Directors (EDs) for critical operations and for regulatory, compliance, risk management and investor grievances, alongside revised reporting and oversight arrangements for key management personnel and additional responsibilities for the Chief Risk Officer (CRiO). The circular requires the EDs for Vertical 1 (Critical Operations) and Vertical 2 (Regulatory, compliance, risk management and investor grievances) to be members of the MII Governing Board and sets a recruitment and approval process including open advertisement, forwarding at least two candidate names to SEBI without order of preference, and obtaining SEBI approval for ED compensation and any subsequent changes. ED performance must be assessed annually under a mechanism similar to the Managing Director (MD) evaluation, with Public Interest Directors responsible for ensuring this. While both EDs report to the MD, specific committees must also meet them quarterly without the MD and other executives present (the Standing Committee on Technology for Vertical 1, and the Regulatory Oversight Committee and Risk Management Committee for Vertical 2), with the Nomination and Remuneration Committee incorporating inputs from these committees and the MD in appraisals. Heads of Department, including the Chief Technology Officer and Chief Information Security Officer (Vertical 1) and the Compliance Officer and CRiO (Vertical 2), must report to the relevant ED rather than the MD, while statutory committees continue to meet these key management personnel at least quarterly without the MD and ED. The CRiO is tasked with handling the System Audit and Cyber Security Audit and becomes an invitee to Standing Committee on Technology meetings alongside the CTO and CISO. The underlying amendments to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 take effect on 20 December 2025. MIIs are to follow a glide path for appointing EDs to the Governing Board, with the first ED appointed within six months and the second within nine months from implementation of the amendments; the revised reporting provisions apply from the date the EDs are appointed, and the CRiO provisions apply from the 60th day of issuance of the circular.
Securities & Exchange Board of India 2025-12-12
Securities and Exchange Board of India strengthens governance of market infrastructure institutions with board-level executive directors and revised oversight and reporting lines
The Securities and Exchange Board of India issued a circular detailing operational requirements to enhance governance at market infrastructure institutions. Key measures include appointing Executive Directors (EDs) for critical operations and regulatory functions, revised reporting structures, and additional responsibilities for the Chief Risk Officer. Amendments to relevant regulations take effect on 20 December 2025, with phased implementation for appointing EDs and applying new reporting provisions.