SEBI Wants Stronger Watchdogs At Stock Exchanges To Protect Investors - Here’s What It Means For You

Have you started investing in stocks recently? Opened a demat account on a popular trading app? You're not alone. India’s stock markets have seen explosive growth in recent years, with over 15 crore demat accounts now active and every day people putting their hard-earned money into stocks, mutual funds, IPOs, and even derivatives.

But with all this activity, comes a big question: Who is making sure that the system is safe, fair, and not just running after profits?

That’s exactly what SEBI, the market regulator, is now addressing with a new plan to tighten the governance of institutions like NSE, BSE, clearing houses, and depositories—the behind-the-scenes players that make the market work.

“MIIs serve as the backbone of the capital market… their primary mandate is to serve as crucial public utilities and first-line regulators,” SEBI said in its paper.

What’s Changing and Why?
SEBI has released a detailed consultation paper proposing stronger oversight in institutions it calls Market Infrastructure Institutions (MIIs)—this includes stock exchanges, clearing corporations (which ensure trades settle properly), and depositories (which hold your shares).

Here’s the key reason: These institutions have become too big and too important to run like just any other business.
Over the last few years:
Demat accounts have tripled
Trading volumes in derivatives have skyrocketed
Exchanges are making record profits and paying huge dividends
Technology costs have risen to keep systems stable

All this growth means more at stake for investors like you.

“Any failure or mis-governance in these critical institutions could have an adverse impact on the securities market and the broader economy,” SEBI warned.

How Will SEBI Protect You?
SEBI is proposing a three-part plan that puts investor protection and market safety above profits:

1.  New Watchdogs on the Inside
SEBI wants two top-level executives at each stock exchange or clearing corporation:
One will handle critical operations like trading, clearing, and settlements
The other will focus on regulation, risk management, compliance, and investor grievances

Both will sit on the governing board—the highest decision-making body—ensuring investor issues and system risks are never ignored.

These officers will be of equal status to the CEO/Managing Director, meaning they can speak up and act when things go wrong.

“Having these senior executives on the Governing Board will ensure timely addressing of concerns,” SEBI noted.

2. Clear Roles and Better Oversight
Until now, many top managers in exchanges had overlapping roles, and the CEO had disproportionate authority.

Now, SEBI wants: Separate roles for key people like the Chief Technology Officer (CTO) and Chief Information Security Officer (CISO)
These officers will report to the new executive directors instead of the CEO
Every quarter, these directors must report to SEBI and internal committees—without the CEO in the room—ensuring independence
This means if there’s a tech glitch, cyber breach, or regulatory violation, there’s now someone who’s job is to fix it—and report it.

3.  No Side Hustles for Exchange Bosses
To avoid conflicts of interest, SEBI is tightening the rules on where top officials of stock exchanges can serve as directors.
Here’s the deal:
The MD/CEO can only be a non-executive director in government companies or non-profit organizations
The new executive directors (EDs) can only sit on the boards of subsidiaries, not other companies
Why this matters: SEBI doesn’t want your exchange’s CEO moonlighting on other boards and getting distracted—or worse, making decisions that benefit other companies over the public.

“The absence of clear provisions… could lead to various risks, including conflicts of interest and reputational risk,” SEBI observed.
 

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What This Means for You, the Investor
If you're investing in the market, this move is designed to protect your money and the integrity of the system. By putting more senior people in charge of investor protection and risk management—and giving them real authority—SEBI is building stronger guardrails.

You may not see the changes immediately on your trading app or dashboard, but these reforms are like tightening the bolts in the machine that powers India’s financial markets.
It’s also SEBI’s way of saying: Public interest comes first, business second.

SEBI Wants Your Opinion Too
SEBI is inviting feedback from investors, companies, intermediaries, and the general public.
You can mention what you think about:
Prioritising investor grievance redressal
Ensuring no one person has unchecked power
Strengthening tech and cybersecurity systems