Securities Market Infrastructure Institutions include stock exchanges, depositories, and clearing firms .These institutions, according to the Bimal Jalan Committee (2010), are systemically vital for the country’s financial growth and serve as the infrastructure required for the securities market.
The Indian stock exchange is a place where financial products such as stocks, bonds, and commodities are exchanged. Depositories are companies, banks, or institutions that hold securities and facilitate securities trading. A clearing company is an organization/entity associated with a stock exchange whose major goal is to oversee the handling of transaction confirmation, settlement, and delivery.
- That MIIs are systemically important in India is clear from the phenomenal growth of these institutions in terms of market capitalisation of listed companies, capital raised and the number of investor accounts with brokers and depositories and the value of assets held in the depositories’ account, as highlighted by the Jalan committee.
- Unlike typical financial institutions, the number of stock exchanges, depositories and clearing corporations in an economy is limited due to the nature of its business, although they cater to the entire marketplace, the panel pointed out. Any failure of such an MII could lead to even bigger cataclysmic collapses that may result in an overall economic downfall that could potentially extend beyond the boundaries of the securities market and the country
Why are governance norms critical in the regulation of MIIs?
- Given the potential for a domino effect that a failure of an MII could have on the wider market and economy, governance and oversight are absolutely critical and need to be of the highest standards.
- For ex:. Because of a technical glitch at the NSE, Investors were not able to trade for about four hours and It prompted the Finance Minister to later state that the loss for the country had been ‘immense’
- National Stock Exchange (NSE), the country’s largest equities and derivatives exchange, was earlier fined for laxity in governance pertaining to actions taken during the tenure of its former MD and CEO
How to structure
- Give an intro about Market Infrastructure Institutions(MII
- Explain in detail
- Explain the importance of them in Indian economy
- Explain the why it has to be regulated by government