Narayan for strengthening of MII ecosystem

Sebi whole-time member says regulator to float consultation paper to consider demerger of equity clearing corporations from exchanges

- KHUSHBOO TIWARI

The focus on commercial objectives by market infrastructure institutions (MIIs) can potentially lead to de-prioritization of their role as the first line of regulator and public utility provider, cautioned Ananth Narayan, whole-time member (WTM) of the Securities and Exchange Board of India (Sebi).

Speaking at the Business Standard BFSI Insight Summit on Thursday, Narayan detailed the steps under consideration to strengthen the MII ecosystem. They include independent evaluation, possible demerger of clearing corporations, and the appointment of key officials including public interest directors (PIDs).

MIIs - stock exchanges, clearing corporations and depositories - are considered the backbone of the stock market ecosystem. They play a vital role in ensuring its stability, efficiency, and investor protection.

Calling for better strengthening their governance framework, Narayan said, "MIIs are not regular commercial entities. Competition, public shareholding, and listing can create incentives that give primacy to commercial outcomes, over the intended core and primary statutory role of the MII as a first-line regulator and public utility provider."

He said as commercial entities, most MIIs enjoy high operating margins with profit margins of more than 60 per cent, high price-to-earnings multiples and make significant dividend payout.

The senior Sebi official voiced concern that the potential investments into appropriate security, technology, risk and operations could get de-prioritized due to commercial factors.