The Securities and Exchange Board of India (SEBI) has proposed allowing stock exchanges and depositories to undertake certain related activities and deploy funds without seeking prior approval from the regulator, subject to specified financial limits and governance safeguards.
The proposal seeks to reduce the regulatory burden on market infrastructure institutions (MIIs), which currently require SEBI’s approval for activities involving deployment of funds or otherwise, except treasury investments made under a board-approved investment policy.
Under the proposed framework, stock exchanges and depositories can use an automatic approval route for two categories of activities. These include activities related or incidental to their core functions in the securities market, such as those undertaken at SEBI’s direction, transfers of shares between an MII and its subsidiaries, and investments by operating subsidiaries using funds generated from their own operations.
The second category covers activities similar to those performed by an MII but undertaken through an investee company regulated by another Indian financial sector regulator. Such activities must have been previously approved by SEBI and remain unchanged.
The aggregate deployment of funds under the automatic route in a financial year would be capped at the lower of 5 per cent of the MII’s net worth as of March 31 of the preceding financial year and the regulatory minimum net worth. After the proposed deployment, the MII’s net worth must remain at least 1.5 times the minimum net worth prescribed by SEBI.
The proposal excludes recognised clearing corporations from the automatic route. SEBI has invited public comments on the proposed regulatory amendments and draft circular until November 12.
SEBI said the existing framework requires prior approval irrespective of the size, nature or regulatory mandate of an activity, increasing the approval burden on MIIs.
“The proposed framework seeks to distinguish between activities that are related to an MII’s core function and those that are unrelated and introduce a proportionate governance safeguards and retain mandatory prior approval for activities that are unrelated or not incidental to the MII’s core function, thereby aligning regulatory oversight with actual risk,” the regulator said.
Under the proposed safeguards, each activity or deployment of funds would require approval from the MII’s governing board. MIIs would also have to frame board-approved standard operating procedures, prevent conflicts of interest and submit half-yearly reports to SEBI on activities undertaken through the automatic route.
Published on October 23, 2026
