The Securities and Exchange Board of India on Thursday came out with a circular putting in external and internal checks for the performances of stock exchanges, clearing corporations and depositories.
As per the new circular, the market infrastructure institutions need to appoint an independent external agency to check their performance and that of their statuary committees every three years. The evaluation will give 40% weightage to how well the institutions fulfill their roles and responsibilities, while 30% weightage each will be given to effectiveness of meetings conducted by the institutional and governance aspects, including compliance with SEBI policies.
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The upcoming evaluation will account for the period of fiscal 2025 and the reports for the same will have to submitted by Sept. 30, 2025. After this, any future evaluations will be conducted on a three-year cycle basis.
In addition to this, the regulator has also come out with a rating system to formalise assessments across institutions and track their performance trends.
However, in order to maintain transparency and any avoid any conflicts of interest, the regulator will hold the power to approve the externally evaluating agencies before being engaged by the market institutions. In fact, the agency should not have been employed by the market institutions during the period of evaluation.
Apart from this, the regulator has also brought forth measures for internal evaluation of the stock exchanges, clearing corporations and depositories.
The first internal evaluation report for fiscal 2025 must be submitted within three months of the financial year's end.
The new rules will come into effect 30 days from the date of the circular. The institutions must update their internal regulations accordingly and inform market participants.
SEBI issued this circular under its regulatory powers to strengthen governance, enhance transparency, and protect investors in the securities market.
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