sebi
Published on 14 July 2025
Evaluating Market Infrastructure Institutions: SEBI Guidelines and Framework
SEBI Tightens Oversight: New Evaluation Framework for Stock Exchanges and Clearing Corporations
In a bid to strengthen the governance machinery of India’s capital market infrastructure, the Securities and Exchange Board of India (SEBI) has laid out a formal framework for evaluating the performance of Market Infrastructure Institutions (MIIs)—a category that includes stock exchanges and clearing corporations.
The goal is clear: ensure these institutions are not just compliant, but continuously improving in how they operate, govern, and safeguard market integrity.
Statutory Committees Under the Lens
At the heart of this framework is a structured evaluation—both internal and external—of MIIs and their key statutory committees. These committees, central to the functioning of any MII, include:
- Nomination and Remuneration Committee
- Standing Committee on Technology
- Risk Management Committee
- Investment Committee
Each plays a vital role in maintaining institutional checks and balances, especially around governance, technology oversight, and risk control.
External Evaluation: Timelines and Scope
Starting FY 2024-25, MIIs will be required to engage an external agency to carry out a formal evaluation of their statutory committees once every three years.
The first such report is due by September 30, 2025, and must be submitted to both the institution’s governing board and SEBI itself. This isn’t a ceremonial review—it’s meant to give an independent view of how well these committees are fulfilling their roles.
Evaluation Will Be Weighted Across Three Key Areas:
| Parameter | Weightage |
|---|---|
| Roles, Responsibilities, and Duties | 40% |
| Effectiveness of Committee Meetings | 30% |
| Governance Aspects of the Committees | 30% |
Each of these broad heads is supported by a series of quantitative and qualitative Key Performance Indicators (KPIs), developed in consultation with the Industry Standards Forum (ISF) of MIIs. This approach ensures consistency across the board and creates a benchmark for performance expectations.
Internal Reviews: An Annual Obligation
External audits are one side of the coin. Internally, MIIs will also need to conduct annual self-assessments of their own functioning and that of their committees.
These evaluations must follow a structure prescribed by SEBI, but institutions are expected to tailor the criteria to their specific operational context—with the final evaluation framework receiving board approval.
Internal reports are to be completed and submitted to the governing board within three months of the end of each financial year, beginning with FY25.
What Makes This Framework Stand Out?
Unlike one-off compliance exercises, this framework is built on continuity, accountability, and refinement:
- Standardised KPIs make performance measurable and comparisons fair.
- Focus on governance and effectiveness ensures committees aren’t ticking boxes—they’re delivering results.
- Mandatory board review of evaluation reports increases accountability at the top.
Moreover, by requiring these assessments on a periodic basis, SEBI is nudging MIIs toward a culture of continuous improvement rather than reactive corrections.
Why It Matters
For institutions at the centre of India’s capital markets, good governance isn’t a luxury—it’s a necessity. The risks these bodies manage on a daily basis—from clearing trades to maintaining fair and orderly markets—are immense.
SEBI’s move to formalise and tighten performance evaluations reinforces a key message: robust governance structures must be functional, not just formal.
Final Word
This evaluation framework marks a meaningful step in SEBI’s broader effort to make India’s market infrastructure more transparent, resilient, and investor-friendly. It’s also a clear signal to MIIs: regulatory compliance is just the baseline—what matters is how effectively and ethically you govern.
By embedding this structure, SEBI isn’t just improving oversight—it’s setting the tone for how India’s financial institutions must carry themselves in a market that’s only becoming more complex, competitive, and globally interconnected.