- SEBI proposes replacing centralised trade-processing hub with API-based direct communication
- Current system causes delays, higher costs, and operational concentration risks
- STP system routes institutional trade messages through a single service provider hub
Markets regulator Securities and Exchange Board of India (SEBI) has proposed a major overhaul of the system used for processing institutional stock market trades, aiming to reduce delays, lower costs and reduce dependence on a single infrastructure provider.
In a consultation paper issued Tuesday, May 19, 2026, SEBI proposed replacing the existing centralized trade-processing hub with a direct communication framework between service providers using application programming interfaces, or APIs. The regulator said the current system adds latency, increases costs and creates operational concentration risks.
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Straight Through Processing (STP) is the backend system used for exchange of trade-related messages such as electronic contract notes between brokers, custodians and institutional investors. The framework is mandatory for institutional trades settled through custodians.
Under the current structure, messages between different service providers are routed through a central hub. SEBI said this results in additional transmission time and charges. The regulator also noted that 95%-99% of all STP traffic is currently routed through a single service provider, increasing concentration risk and the possibility of a single point of failure.
The proposed framework would allow service providers to communicate directly with each other instead of routing messages through the central hub. SEBI said this would improve operational efficiency, scalability and resilience while reducing costs for market participants.
The regulator added that the proposal would not require system changes for brokers, custodians, institutional investors and other STP users.
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SEBI has also proposed optional API-based communication between users serviced by the same provider to reduce manual file uploads and downloads, which it said remain prone to operational errors.
Public comments on the proposal have been invited until June 9.
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