The Securities and Exchange Board of India is likely to reconsider few terms of its proposed governance norms for Market Infrastructure Institutions after key stock exchanges are learnt to have expressed strong apprehensions about the plan.
The exchanges are expected to formally submit their objections before the July 15 deadline for public comments.
In its consultation paper issued in June, SEBI proposed mandating the appointment of two executive directors as key managerial personnel on the boards of MIIs, which include stock exchanges, clearing corporations and depositories. These EDs would hold ranks equivalent to that of the managing director and report jointly to both the MII's board and SEBI.
The flagged, however, concerns that the proposed governance model could disrupt the current leadership structure and reduce the MD's authority.
“There's concern that this creates a dual power centre and could blur accountability,” a senior exchange official told NDTV Profit.
The exchanges have also pointed to the absence of clear definitions around the EDs' roles and reporting responsibilities. Questions have been raised about the extent of their operational authority and how their dual reporting lines to SEBI and the board would work in practice.
The move comes in the wake of high-profile governance and tech failures including instances like co-location in recent years that raised questions about oversight in MIIs.
“Robust governance is central to safeguarding market integrity,” a regulatory source said. “The proposed structure aims to strengthen the second line of executive oversight and prevent concentration of power.”
Industry experts say the success of SEBI's reform depends on clearly defined roles and a governance model that does not undercut operational leadership.
“There is a fine line between oversight and micromanagement,” one market expert noted requesting anonymity.
As the deadline for public comments nears, all eyes are on how SEBI will respond to the mounting opposition. SEBI may revisit its proposal — or brace for further resistance from the institutions it regulates.
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