Sebi releases uniform framework for evaluation of stock exchanges, other MIIs

The Independent External Agency shall be appointed with prior No Objection Certificate (NOC) from SEBI , said the circular.

The market regulator has released a uniform framework to be followed by independent agencies that evaluate a market infrastructure institution's (MII's) performance.

Under the framework, the maximum weightage of 40 percent has been given to resilience in technology and processes of MIIs, in delivery of its core functions; and the minimum weight of 5 percent has been assigned to two parameters which are adequacy of resources, and fair access and treatment to all stakeholders and information disclosure.

The current regulations require MIIs such as stock exchanges, clearing corporations and depositories to appoint an external, independent agency to evaluate their performance and the performance of their statutory committees at regular intervals.

As of now these evaluations are not done in the same manner.

A circular released on September 24 by the Securities and Exchange Board of India (Sebi) stated, "In order to bring consistency and uniformity with respect to evaluations to be done by the external agency, it was felt that basic minimum standards and principles should be developed along with weightages."

After discussions with the industry standards forum, the current framework was set.

According to the circular, the external evaluation should be done every three years except for the first year. For FY25, when the first such evaluation will be done, the report should be submitted to the governing board of the MII and Sebi by September 30, 2025.

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The subsequent evaluations shall be done every three years. The circular said, upon completion, a report in this regard shall be submitted to the Governing Board of the MII and SEBI within six months from the end of the third fiscal to be evaluated.

To appoint external agency

The circular said that the following principles are to be followed:

1.The Independent External Agency shall be appointed with prior No Objection Certificate (NOC) from SEBI and on such terms and conditions, including fees, timelines, etc. as may be approved by the Governing Board of the MII.

2. The Independent External Agency shall have requisite domain knowledge, experience and expertise on matters concerning the securities market and the functioning of the MII.

3. MII shall ensure that there is no conflict of interest in the appointment of the Independent External Agency and the Agency had not been employed/hired by the MII for the evaluation period and till submission of the report.