Market Infrastructure Institutions (MII)
Market Infrastructure Institutions (MIIs) are stock exchanges, depositories, and clearing corporations that form the core operational backbone of the Indian securities market, and are subject to enhanced governance and ownership norms prescribed by SEBI given their systemic importance.
The term 'Market Infrastructure Institution' was formally adopted in SEBI regulations and circulars to collectively describe entities that provide critical shared infrastructure to all market participants: stock exchanges (NSE, BSE, MSEI), clearing corporations (NSCCL, ICCL, MCX-SX Clearing), and depositories (NSDL, CDSL). These entities enjoy regulatory recognition under the Securities Contracts (Regulation) Act 1956 and the Depositories Act 1996 and are granted monopoly-like privileges — only SEBI-recognised exchanges can operate organised trading platforms, for instance.
SEBI's approach to MII governance is guided by the principle that these entities must not be operated purely in the commercial interest of their shareholders, as their primary function is the provision of neutral, resilient, and fair infrastructure to all market participants. Accordingly, SEBI has imposed several structural constraints: (a) no single shareholder other than stock exchanges or depositories may hold more than 15% of the paid-up equity capital of an MII; (b) foreign ownership is capped at 49% in aggregate; (c) the board of an exchange or depository must have at least 50% 'Public Interest Directors' (PIDs) who are neither shareholders nor connected to trading members.
The dual role of exchanges as commercial entities and Self-Regulatory Organisations (SROs) — responsible for member regulation, market surveillance, and enforcement of exchange bye-laws — creates an inherent conflict. SEBI has attempted to address this through mandatory separation of commercial and regulatory functions, requiring exchanges to route surveillance and disciplinary matters through dedicated committees insulated from commercial pressures.
System reliability standards for MIIs are among the most stringent in the financial sector: exchanges must maintain an uptime of 99.9% or more for critical trading systems, maintain a Disaster Recovery (DR) site capable of resuming operations within a defined Recovery Time Objective, and submit technology audit reports. The 2024 SEBI Circular on Cloud Adoption by MIIs permitted the use of cloud infrastructure under a detailed governance framework, marking a significant technology policy shift.