CIRCULAR
SEBI/HO/MRD/POD-III/CIR/P/2025/12 January 30, 2025
To,
All Recognized Stock Exchanges
All Recognized Clearing Corporations
All Depositories
Sir/ Madam,
Subject:
(1) Parameters for external evaluation of Performance of Statutory Committees
of Market Infrastructure Institutions (MIIs); and
(2) Mechanism for internal evaluation of Performance of MIIs and its Statutory
Committees
1. Regulation 29 of the Securities Contracts (Regulation) (Stock Exchanges and
Clearing Corporations) Regulations, 2018 (hereafter referred to as “SECC
Regulations, 2018”) and Regulation 30 of the SEBI (Depositories and Participants
Regulations, 2018 (hereafter referred to as “D&P Regulations, 2018”) provides for
the constitution of following statutory committees by every recognised Stock
Exchange, recognised Clearing Corporation and Depository (collectively referred
as Market Infrastructure Institutions (MIIs)):
1.1. Functional Committees
1.1.1. Member Committee
1.1.2. Nomination and Remuneration Committee
1.2. Oversight Committees
1.2.1. Standing Committee on Technology
1.2.2. Regulatory Oversight Committee
1.2.3. Risk Management Committee
1.3. Investment Committee
2. Regulation 33(6) of the SECC Regulations, 2018 and Regulation 31(6) of the D&P
Regulations, 2018 states that every MIIs shall appoint an independent external
agency to evaluate its performance and the performance of its statutory
Page 1 of 4
committees within such periodicity and in such a manner as may be specified by
the Board.
3. The guidelines on “Parameters for Performance Evaluation of Market Infrastructure
Institutions” have been issued vide SEBI Circular No. SEBI/HO/MRD/POD-
III/CIR/P/2024/127 dated September 24, 2024.
4. In order to bring consistency and uniformity with respect to evaluations to be done
by the external agency, the matter with regard to broad criteria, the weightage for
each criterion, sub-parameters under each criterion, etc. was discussed at the
Industry Standards Forum (ISF) of MIIs. Further, for each sub-parameter, sample
Key Performance Indicators (KPIs), both quantitative and qualitative in nature,
were identified in consultation with the ISF.
5. The minimum criteria for the independent external evaluation of performance of
Statutory Committees of MIIs and their weightages are as under:
S.N. Criteria Weightage
(i) Roles, Responsibilities and Duties of Statutory Committees 40%
(ii) Effectiveness of meetings of Statutory Committees 30%
(iii) Governance aspect of Statutory Committees 30%
The above criteria may be reviewed, depending upon the evolving regulatory and
operating context.
6. The broad framework in this regard, developed in consultation with ISF of MIIs is
provided at Annexure A.
7. Rating Framework
7.1. In order to ensure consistency in the manner of assessment and outcomes
across Statutory Committees of similar MIIs, compare performance of such
Committees and monitor trends over time, a rating framework has been
developed which would be assigned after evaluation of Statutory Committees of
MIIs. The rating would reflect the Independent External Agency’s judgment on
the performance of the Statutory Committees of an MII in respect of expected
outcomes. The rating framework is provided at Annexure-B.
8. Principles for appointment of Independent External Agency: The following
principles shall be adhered to by the MIIs for selection of an independent external
agency:
Page 2 of 4
8.1. The Independent External Agency shall be appointed with prior No Objection
Certificate (NOC) from SEBI and on such terms and conditions, including fees,
timelines, etc. as may be approved by the Governing Board of the MII. Thus, the
MII shall forward the details of the external agency to SEBI for prior NOC before
appointment.
8.2. The Independent External Agency shall have requisite domain knowledge,
experience and expertise on matters concerning the securities market and/or the
functioning of the Statutory Committees of MIIs.
8.3. MII shall ensure that there is no conflict of interest in the appointment of the
Independent External Agency and the Agency had not been employed/hired by
the MII for the evaluation period and till submission of the report. However, the
MII can hire the services of the same Independent External Agency appointed
for external evaluation of the MII, for external evaluation of its Statutory
Committees, subject to compliance with the requirements stated at paragraph
8.2 above.
9. Timelines for External Evaluation
9.1. The independent external evaluation of Statutory Committees shall take place
once in three years for each MII. In this regard, the following shall be ensured:
9.1.1. The first independent external evaluation shall be only for the Financial Year
(FY) 2024-2025. The report of the same shall be submitted to the Governing
Board of the MII and SEBI by September 30, 2025.
9.1.2. The subsequent independent external evaluation(s) shall be for a block of next
three FYs and so on. Upon completion, a report in this regard shall be
submitted to the Governing Board of the MII and SEBI within 6 months from
the end of the 3rd FY to be evaluated.
10. Internal Evaluation of Performance of MIIs and its Statutory Committees
10.1. Regulation 33(5) of SECC Regulations, 2018 and Regulation 31(5) of D&P
Regulations, 2018 stated that every recognised stock exchange, recognised
clearing corporation and depositories shall internally conduct annual evaluation
of its performance and the performance of its statutory committees in such a
manner as may be specified by the Board.
Page 3 of 4
10.2. The MIIs shall develop the set of criteria for comprehensive internal evaluation
of performance of the MII and its Statutory Committees.
10.3. The report of the internal evaluation of the MII and its Statutory Committees shall
be submitted to the Governing Board of the MII within 3 months from the end of
each FY. The first report shall be for the FY 2024-25.
11. Applicability: The provisions of this Circular shall come into force from 30th day of
its issuance.
12. The MIIs are directed to:
12.1. take necessary steps and put in place necessary systems for the implementation
of the above;
12.2. make necessary amendments to the relevant bye-laws, rules and regulations,
wherever applicable, for the implementation of the above; and
12.3. bring the provisions of this circular to the notice of market participants (including
investors) and also disseminate the same on their website.
13. This circular is issued in exercise of the powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act 1992 read with Regulation
51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2018, Section 26(3) of the Depositories Act, 1996 and
Regulation 97 of Securities and Exchange Board of India (Depositories and
Participants) Regulations, 2018 to protect the interests of investors in
securities and to promote the development of, and to regulate the securities
market.
14. This circular is available on SEBI website at www.sebi.gov.in.
Yours faithfully,
Hruda Ranjan Sahoo
Deputy General Manager
Tel. No. 022-26449586
Email: hrsahoo@sebi.gov.in
Page 4 of 4