The Securities and Exchange Board of India has issued a consultation paper to allow stock exchanges and depositories to pursue certain business activities without prior regulatory approval. The proposed automatic route seeks to streamline operations while enforcing strict financial and governance guardrails. The regulator has invited industry feedback on the framework until November 12, 2026.
The Securities and Exchange Board of India has proposed a new framework that could significantly simplify how stock exchanges and depositories operate. Currently, these entities—collectively known as Market Infrastructure Institutions or MIIs—must seek prior clearance from the regulator for almost every fund deployment or new activity. This often results in administrative delays for routine operational decisions. Under the new proposal, the regulator aims to introduce an automatic approval route that would allow these institutions to execute specific business plans without the need for prior consent.
The proposal outlines two specific pathways for this automatic approval. The first route targets regulator-mandated initiatives, transfers of shares between group entities, and activities funded entirely by a subsidiary’s own earnings. The second route applies to activities that align with functions already performed by other financial sector entities, provided they have previously received SEBI sanction and involve no change in scope. This dual-track system is designed to reduce the compliance burden for operational tasks.
To balance this operational freedom with market safety, the regulator has built strict controls into the proposal. Any annual deployment of funds under these new routes will be capped at the lower of 5 percent of the institution's net worth or the prescribed regulatory minimum. Additionally, to ensure financial stability, the institution must maintain a net worth of at least 1.5 times the regulatory requirement after the deployment.
Governance remains a focal point of the framework. While the regulator is easing the approval process, it is not removing oversight. Each activity or investment must still receive approval from the institution's board of directors. Furthermore, the proposal mandates robust conflict-of-interest policies and requires that all investee companies meet strict criteria. Institutions will also have to provide half-yearly disclosures within 30 days of the period ending to ensure transparency.
For investors, this shift toward an automatic approval model could improve the operational agility of listed market infrastructure companies like the BSE or Central Depository Services. By reducing the time taken for routine business approvals, these institutions may be able to adapt faster to operational needs, though the ultimate benefit will depend on the final rules established after the consultation process. The regulator has invited public feedback on these proposals until November 12, 2026, which will be the next key monitorable for the industry and its shareholders.