SEBI Proposes Automatic Approval Route for Investments by Exchanges and Depositories — October 23, 2026

In a bid to enhance ease of doing business and calibrate regulatory oversight with actual systemic risk, the Securities and Exchange Board of India (SEBI) has proposed an automatic approval route for investments made by Market Infrastructure Institutions (MIIs).

The market regulator released a consultation paper reviewing Regulation 38(2) of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (SECC Regulations) and Regulation 7(c)(i) of the Depositories and Participants Regulations, 2018 (D&P Regulations). Public comments on the proposed framework have been invited through November 12, 2026.

Streamlining Bureaucracy for Low-Risk Investments

Under the existing framework, stock exchanges, clearing corporations, and depositories must seek prior approval from SEBI before deploying capital into any related business, subsidiary, or financial venture. This uniform requirement applies equally to routine, low-risk allocations and large strategic transactions, frequently creating procedural bottlenecks and delaying operational rollouts.

SEBI highlighted that regulatory oversight should be proportionate to financial and governance risks rather than encumbering day-to-day capital allocation.

Key Categories Proposed for Automatic Approval:

• Core Market Functions: Investments directly tied to activities already permitted for stock exchanges, depositories, and clearing corporations.
• Regulatory Mandates: Capital infusions into strategic platforms or market development projects expressly directed or mandated by SEBI.
• Internal Accruals via Subsidiaries: Investments routed through existing wholly-owned or operating subsidiaries utilizing internally generated cash flows.
• Cross-Regulated Entities: Equity or debt stakes taken in entities supervised by other statutory domestic financial regulators, such as the Reserve Bank of India (RBI) or the Insurance Regulatory and Development Authority of India (IRDAI).

Governance and Safeguards

While relaxing prior approvals, SEBI made clear that supervisory standards will not be diluted. The responsibility for evaluating prudential limits, conflict-of-interest risks, and strategic fit will shift firmly onto the governing boards of the MIIs.

Institutions will be expected to adhere to defined financial caps, robust risk-management mechanisms, and post-facto reporting obligations to ensure that core clearing, settlement, and exchange operations remain insulated from balance-sheet stress.

Market Impact and Relevance for Investors

The proposed changes are particularly significant for India's capital market architecture, where leading MIIs—such as BSE Limited, Central Depository Services (India) Limited (CDSL), and Multi Commodity Exchange of India (MCX)—are publicly listed commercial entities, alongside the National Stock Exchange of India (NSE).

Listed MIIs face constant operational pressure to invest in cutting-edge technological infrastructure, cloud computing, cybersecurity, and value-added market-data analytics. By dismantling the requirement for transaction-by-transaction pre-approvals, SEBI is granting these institutions the agility needed to deploy capital efficiently, partner with fintech ecosystems, and unlock shareholder value without compromising systemic stability.

Tags: SEBI BSE CDSL MCX NSE Capital Markets