India’s markets regulator plans to let stock exchanges and depositories undertake certain investments without prior approval, subject to financial caps, board oversight and reporting requirements.
India’s markets regulator has proposed a simpler approval process for stock exchanges and depositories, allowing them to carry out certain investments and related activities without first seeking permission from the Securities and Exchange Board of India. The draft change is intended to reduce compliance friction for market infrastructure institutions, or MIIs, while keeping financial limits and governance checks in place.
According to Sebi’s consultation paper, the existing framework treats all such proposals alike, regardless of size, purpose or risk. The regulator said that can create unnecessary paperwork even for small investments that support day-to-day market operations, while also duplicating scrutiny when an activity has already been directed by Sebi or falls within the remit of another financial-sector regulator.
Under the proposal, recognised stock exchanges and depositories, but not recognised clearing corporations, would be able to use an automatic route for two broad categories of activity. The first would cover work linked directly or incidentally to their core functions, including actions taken at Sebi’s direction, certain intra-group share transfers and deployments of operating subsidiaries’ own earnings. The second would apply to activities that mirror those already carried out through entities regulated by another Indian financial regulator, as long as Sebi has previously approved the activity and its nature remains unchanged.
The regulator has also laid out guardrails. Aggregate fund deployment under the automatic route would be capped in a financial year at the lower of 5 per cent of an MII’s net worth from the previous March 31 or the minimum net worth required by the regulator. Even after such deployment, the institution’s net worth would have to remain at least 1.5 times the prescribed minimum. In addition, each new activity would still need board approval, companies involved would have to meet fit-and-proper standards, and MIIs would need to adopt board-approved operating procedures and file half-yearly reports with Sebi within 30 days of the end of each six-month period.
The consultation reflects Sebi’s broader push to ease the regulatory burden on the institutions that underpin India’s securities market. Public comments on the draft are open until November 12.
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