Market institutions: Roles blurred

Market infrastructure institutions (MIs) — stockexchanges (SEs), clearingcorporations, and depositories — play a pivotal role in developing and regulating capital markets.

- AJAY TYAGI

Chapter V of the Securities Markets Code Bill, 2025, deals with the registration and regulation of MIs. It does not merely reaffirm their traditional frontline responsibilities under the existing law: it elevates them tothe status of quasi-sovereign authorities with wide-ranging powers of market access, conduct, investigation, and enforcement.

While having a first-level regulatory body, supervised and regulated by the Securities and Exchange Board of India (Sebi), isa pragmatic necessity, considering the large number of regulated market inter-mediaries, of variouscategories, itistimeto takea relookat the structure and function-ing of MIs in the context of them playing the role of public institutions while simul.taneously engaging in commercial activ-ities. This column focuses on SEs.

SEs’ proximity to trading enables real-time monitoring, enforcing listing standards, and maintaining orderly markets. Chapter V goes significantly further. It vests SEs with the authority to frame binding bylaws, conduct inspection, initiate investigation, and impose sanctions. More notably, these powers extend beyond members to market participants at large. What were once limited, delegated functions are now core statutory powers, effectively embedding quasi-regulatory authority within commercial entities.