Over-engineering MIIs

The Securities and Exchange Board of India (Sebi) is once again in the spotlight with its latest consultation paper on the governance of market infrastructure institutions (MIIs) released on June 24.

- SANDEEP PAREKH

While the paper aims to reinforce systemic accountability and operational transparency, it has triggered strong resistance from within the very institutions it seeks to regulate. The proposed framework is a classic instance of regulatory overreach, one that risks undermining the foundational principles of effective governance, blurring the lines of accountability, and putting constraints on the operational flexibility essential for market resilience and innovation.

Sebi's efforts to enhance governance within MIIs are not new. From the Kania Committee in 2002 to the Bimal Jalan and R Gandhi Committees in 2010 and 2017 respectively, and more recently, the Mahalingam Committee in 2022, there has been a steady evolution of oversight frameworks. However, a growing concern is that Sebi's posture has shifted—from enabling strong, principle-based self-governance to imposing rigid, top-down structural mandates. A similar push in the November 2024 consultation paper proposed Sebi's direct involvement in the appointment and termination of key managerial personnel (KMP) of MIIs through an external agency-led process. That proposal was met with firm opposition and ultimately not taken up by Sebi.