Recently, Securities and Exchange Board of India (SEBI) noted that the National exchange (NSE), the country’s largest equities and derivatives exchange could be a systemically important market infrastructure institution (MII).
When we see Stock exchanges, depositories and clearing houses ,they are all Market Infrastructure Institutions and constitute a key a part of the nation’s vital economic infrastructure.
According to a panel founded (in 2010) under the chairmanship of former bank of India Governor Bimal Jalan, the term ‘market infrastructure’ denotes such fundamental facilities and systems serving this capital market.
Whereas when we talk about the primary purpose of the securities /capital market is to enable allocation/reallocation of capital/financial resources.
MIIs helps in optimal use of cash within the economy and fostered economic development.
They constitute the nucleus of the capital allocation system and are indispensable for economic process and have a net positive effect on society like all other infrastructure institution.
MIIs are systemically important in India is obvious from the exceptional growth of those institutions in terms of market capitalisation of listed companies, capital raised and also the number of investor accounts and therefore the value of assets held within the depositories’ account.
Any failure of such an MII may lead to even bigger cataclysmic collapses which will lead to an overall economic downfall that might potentially extend beyond the boundaries of the stock exchange and also the country.
Given the potential for a consequence that a failure of an MII could wear the broader market and economy, governance and oversight are absolutely critical and want to be of the best standards.
Among stock exchanges, the SEBI lists seven, including the BSE, the NSE, the Multi commodities market of India and also the Metropolitan stock market of India.
When we talk about the kinds of depositories ,there are two kinds of depositories — charged with the safekeeping of securities and enabling their trading and transfer — that are tagged MIIs: the Central Depository Services Ltd. along with the National Securities Depository Ltd.
The regulator also lists seven clearing houses including the Multi commodities market Clearing Corporation.
Clearing houses, for his or her part, help validate and finalise securities trades and make sure that both buyers and sellers honour their obligations