Market infrastructure institutions (MIIs)
- November 10, 2022
- Posted by: OptimizeIAS Team
- Category: DPN Topics
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Market infrastructure institutions (MIIs)
Subject: Economy
Context:
The Securities and Exchange Board of India sought public comments on a report submitted by one of its working committees on strengthening the governance of market infrastructure institutions (MIIs).
Details:
- In April, the market regulator formed a committee under G. Mahalingam to strengthen governance norms at the MIIs.
- Functional classification, board independence, widening the definition of key managerial person and capping their compensation, and tightening the net worth criteria are some of the key proposals put forth by the 13-member committee formed by SEBI.
Market Infrastructure Institutes:
- MIIs are institutions providing infrastructure of trading, settlement and record keeping and include stock exchanges, clearing corporations and depositories.
- Stock exchanges, depositories and clearing houses are all Market Infrastructure Institutions and constitute a key part of the nation’s vital economic infrastructure.
- MIIs helps in optimal use of money in the economy and fostered economic development.
- They constitute the nucleus of the capital allocation system and are indispensable for economic growth and have a net positive effect on society like any other infrastructure institution.
- That MIIs are systemically important in India is clear from the phenomenal growth of these institutions in terms of market capitalization of listed companies, capital raised and the number of investor accounts with brokers and depositories and the value of assets held in the depositories’ account.
- Currently, MIIs are required to have a minimum net worth of not less than Rs 100 crore on a continuous basis.
- What are the specific institutions in India that qualify as MIIs?
- Among stock exchanges, the SEBI lists seven, including the BSE, the NSE, the Multi Commodity Exchange of India and the Metropolitan Stock Exchange of India.
- There are two depositories — charged with the safekeeping of securities and enabling their trading and transfer — that are tagged MIIs: the Central Depository Services Ltd. and the National Securities Depository Ltd.
- The regulator also lists seven clearing houses including the Multi Commodity Exchange Clearing Corporation.
- Clearing houses, for their part, help validate and finalise securities trades and ensure that both buyers and sellers honour their obligations.