SEBI proposal may open up data, technology businesses for exchanges

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SENSEX 74,459.53

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+ 116.35

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+ 206.00

GOLD 138,475.00

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Market infrastructure institutions could get greater flexibility to expand related businesses and deploy subsidiary earnings, subject to tighter board oversight and safeguards against conflicts of interest

By Akshata Gorde

Updated - November 01, 2026 at 06:59 PM.

The proposal also covers certain activities undertaken through investee companies regulated by other financial-sector regulators | Photo Credit: REUTERS

Stock exchanges and depositories could get greater flexibility to expand into businesses such as market data, analytics and technology services under a proposal by the Securities and Exchange Board of India (SEBI), to allow their operating subsidiaries to reinvest earnings in related activities without seeking fresh regulatory approval.

The proposal could help market infrastructure institutions (MIIs) make greater commercial use of their existing infrastructure and capabilities, while reducing the approval burden for activities that directly support market operations.

The regulator last week proposed an automatic approval route for specified activities related or incidental to an MII's core functions. These include activities undertaken at the regulator's direction, certain transfers of shares between an MII and its subsidiaries, and deployment of funds by an operating subsidiary exclusively from earnings generated through its own operations.

Operational Gain

“Think market data and analytics, technology and information services, intra-group share transfers, or a subsidiary reinvesting its own operating earnings (route A),” said Nikunj Saraf, CEO of Choice Wealth. “The operational gain is real: shorter time-to-market, board-level accountability replacing central pre-clearance, and the ability to monetise the deep data and infrastructure these institutions already own,” he said.

The proposal also covers certain activities undertaken through investee companies regulated by other financial-sector regulators, where SEBI has previously approved the activity and its scope remains unchanged.

However, while governance conditions are principally outlined by SEBI, the details will need to be worked out by the MII’s governing board. The boards will have to balance between specifics and allow flexibility to subsidiaries but within limits, Vanya Singh, Partner at Cyril Amarchand Mangaldas said.

"The relaxation could enable MIIs to respond more efficiently to evolving market requirements, optimise capital deployment and pursue operational synergies," said Hardeep Sachdeva, senior partner at AZB & Partners.

Ring-Fencing

The proposed flexibility, however, would need to be balanced against the risk of commercial interests interfering with the regulatory responsibilities of exchanges and depositories.

The MII’s governing board would have to approve each new activity or fund deployment and ensure that it does not create conflicts with the institution’s market functions or compromise resources needed for technology upgrades, regulatory obligations and investor protection. The proposal also requires safeguards such as arm’s-length arrangements, ring-fencing of shared resources, fit-and-proper compliance and half-yearly reporting to SEBI.

“The possibility of conflicts of interest constitutes perhaps the most consequential consideration arising from the proposed framework,” said Tushar Kumar, Advocate, Supreme Court of India. “Financial safeguards alone cannot adequately address conflicts arising from preferential access, information asymmetry or competing institutional incentives.”

Burzin Bharucha, Partner at White & Brief, said the framework would need clear separation between an MII’s commercial and regulatory functions, with SEBI retaining the ability to intervene where market integrity or investor protection is at risk.

The proposed automatic route will not extend to recognised clearing corporations. Activities outside the specified categories would continue to require prior SEBI approval.

Published on November 1, 2026

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