Market Infrastructure Institutions

• 24 Mar 2021

Why in News

The Securities & Exchange Board of India (SEBI) has asked Market Infrastructure Institutions (MIIs) to begin operations from disaster recovery sites within 45 minutes of a disruption to critical systems, including trading.

• The directive comes against the backdrop of a technical glitch at the National Stock Exchange (NSE) on 24^th February that halted trading for nearly four hours.

Key Points

• SEBI’s Latest Directive:
  
  • New Framework for MIIs:
    
    • SEBI has come out with a new framework for Business Continuity Plan (BCP) and Disaster Recovery (DR) of Market Infrastructure Institutions (MIIs) - stock exchanges, clearing corporations and depositories.
    • Business Continuity (BC) and Disaster Recovery (DR) are closely related practices that support an organization's ability to remain operational after an adverse event.
  • Guidelines:
    
    • In the event of disruption of any one or more of the 'critical systems', the MII would, within 30 minutes of the incident, declare that incident as 'disaster'.
      
      • Critical systems for an exchange or clearing corporation would include trading, risk management, collateral management, clearing and settlement and index computation.
      • Critical systems' for a depository shall include systems supporting settlement process and inter-depository transfer systems.
    • MIIs have been directed to move to disaster recovery sites within 45 minutes of declaring an incident a ‘disaster’.
      
      • A disaster recovery site is a place that a company can temporarily relocate to following a security breach or natural disaster.
      • It ensures that a company can continue operations until it becomes safe to resume work at its usual location or a new permanent location.
      • Mobile- and cloud-based disaster recovery sites are becoming increasingly popular.
    • The new guidelines should be implemented within 90 days.
• Market Infrastructure Institutions (MIIs):
  
  • Stock exchanges, depositories and clearing corporations are collectively referred to as securities Market Infrastructure Institutions (MIIs).
  • According to the Bimal Jalan Committee (2010), these institutions are systemically important for the country’s financial development and serve as the infrastructure necessary for the securities market.
  • The stock exchange in India serves as a market where financial instruments like stocks, bonds and commodities are traded.
  • Depositories may be organizations, banks, or institutions that hold securities and assist in the trading of securities.
  • A clearing corporation is an organisation/entity affiliated with a stock exchange whose primary objective is to oversee the handling of confirmation, settlement, and delivery of transactions.

SEBI

• The Securities and Exchange Board of India was established on 12th April, 1992 in accordance with the provisions of the Securities and Exchange Board of India Act, 1992.
• Major Function:
  
  • To protect the interests of investors in securities.
  • To regulate the securities market.

NSE

• The National Stock Exchange of India Limited (NSE) is India's largest financial market.
• Incorporated in 1992, the NSE has developed into a sophisticated, electronic market, which ranked fourth in the world by equity trading volume.
  
  • NSE was the first exchange in India to provide modern, fully automated electronic trading.
  • The NSE is the largest private wide-area network in India.
• The NIFTY 50 is the flagship index on the National Stock Exchange of India Ltd. (NSE). The Index tracks the behavior of a portfolio of blue chip companies, the largest and most liquid Indian securities. It includes 50 of the approximately 1600 companies listed on the NSE.

Source: TH