SEBI Circular: Provisions relating to Strengthening Governance of Market Infrastructure Institutions (MIIs)

The Securities and Exchange Board of India (“SEBI”) in view of the rapid expansion of the Indian securities market and the systemic importance of Market Infrastructure Institutions (“MIIs”), has issued a circular on December 12, 2025, operationalising governance reforms approved by the SEBI Board on September 12, 2025. These reforms align with amendments to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 and the SEBI (Depositories and Participants) Regulations, 2018 notified on November 21, 2025.

• Appointment of Executive Directors (EDs)

MIIs are required to appoint two Executive Directors for Critical Operations (Vertical 1) and for Regulatory, Compliance, Risk Management and Investor Grievances (Vertical 2), who shall be members of the Governing Board. The appointments are required to be made through an open advertisement process, and at least two candidates with proposed compensation terms must be submitted to SEBI for approval. Performance evaluations shall be overseen by the Public Interest Directors, and MIIs facing practical difficulties may seek exemptions from SEBI for a certain period of time.

• Reporting Framework for Eds

Executive Directors shall report to the Managing Director, while their performance will be independently assessed by the relevant Board committees. The Standing Committee on Technology shall hold quarterly meetings with the Executive Director of Vertical 1 without the presence of the Managing Director or other executives, and the Regulatory Oversight Committee and Risk Management Committee shall similarly meet the Executive Director of Vertical 2. The Executive Directors shall also submit quarterly reports to the Governing Board and wherever necessary may place matters directly before SEBI.

• Revised Reporting of KMPs

All Heads of Department under Vertical 1, including the Chief Technology Officer and Chief Information Security Officer, shall report to the Executive Director of Vertical 1, and all Heads of Department under Vertical 2, including the Compliance Officer and Chief Risk Officer, shall report to the Executive Director of Vertical 2. Accordingly, the reporting lines of these key managerial personnel shift from the Managing Director to the respective Executive Directors, while statutory committees shall continue to hold independent quarterly meetings with such personnel.

• Guidance Role of the Chief Risk Officer (CRO)

The CRO shall oversee all system and cyber security audits of the MIIs and shall attend meetings of the Standing Committee on Technology as an invitee along with the Chief Technology Officer and the Chief Information Security Officer.

• Applicability

The first Executive Director is required to be appointed within six months from the effective date of the amended regulations and the second Executive Director within nine months. The revised reporting framework shall apply from the respective dates of appointment of the Executive Directors. Provisions relating to the Chief Risk Officer shall come into effect sixty days from issuance of the circular. MIIs are required to take necessary steps for implementation, including amendments to their internal regulations and appropriate dissemination of the changes.

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