SEBI Proposes Automatic Approval Route for Stock Exchanges and Depositories; Sets Fund Limits

The Securities and Exchange Board of India (SEBI) has proposed allowing stock exchanges and depositories to undertake certain activities linked to their core operations without seeking prior approval for each case. The proposal introduces an automatic route for eligible activities and fund deployment, with financial limits and board-level oversight. 

The consultation paper is open for public comments until November 12, 2026. The proposed framework covers market infrastructure institutions (MIIs), excluding recognised clearing corporations. 

Two Routes For Activities Without Prior Approval 

Route A would cover activities undertaken under SEBI directions, certain share transfers within an MII group, and fund deployment by an operating subsidiary using its own operational earnings. 

Route B would apply to activities similar to those carried out by an MII through an entity regulated by another Indian financial sector regulator. The activity must already have SEBI approval, and its nature must remain unchanged. 

Annual Fund Deployment to be Capped 

Under the proposal, total fund deployment through the automatic route in a financial year would be capped at the lower of 5% of the MII's net worth as of March 31 of the preceding financial year or the applicable regulatory minimum net worth requirement. 

After deployment, the MII's net worth must remain at least 1.5 times the prescribed minimum net worth. 

Board Approval and Reporting Conditions 

Each new activity or fund deployment would require prior approval from the MII's governing board. The framework would also require measures to prevent conflicts of interest and compliance with fit-and-proper criteria for investee companies, their directors and shareholders. 

MIIs would need board-approved standard operating procedures and would have to submit half-yearly reports to SEBI within 30 days of each half-year's end. 

SEBI Reviewing the Existing Framework 

SEBI said the current rules require prior approval regardless of an activity's size, nature or risk. This can create additional compliance work even for small investments supporting market operations.  

The regulator also cited potential duplication of scrutiny when activities are already directed by SEBI or involve entities regulated by other financial sector regulators. 

Read More: India Notifies New Telecom Sandbox Rules to Support Technology Testing! 

Conclusion 

The proposal would allow eligible activities to proceed through a defined automatic route while retaining financial limits, board oversight and reporting requirements. SEBI has invited public comments until November 12, 2026. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.  

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