Market Infrastructure Institutions

Some institutions in a securities market are not participants in it — they are the market. If one of them stops, everybody stops. SEBI calls these Market Infrastructure Institutions, and regulates them differently from the brokers and funds that use them.

The core three are the ones a Series I candidate meets constantly:

• Stock exchanges — provide the platform where a buyer and a seller meet and a trade is executed.
• Clearing corporations — settle the trade, and guarantee it, by becoming the central counterparty to both sides through novation.
• Depositories — hold securities in dematerialised form.

SEBI's Cyber Security and Cyber Resilience Framework (CSCRF) extends the list to five, adding KYC Registration Agencies (KRAs) and Qualified Registrars and Transfer Agents (QRTAs), because they too hold data whose failure would be systemic.

The phrase is used in two different scopes in the workbook, and that is the whole difficulty of the term.

Under the CSCRF, notified by SEBI to take effect in phases from 1 January 2025, the following regulated entities are constituted as MIIs: stock exchanges, depositories, clearing corporations, KRAs and QRTAs. They face the strictest tier of cyber obligations, built on five cyber-resiliency goals — anticipate, withstand, contain, recover, evolve.

In the investor grievance chapter, the workbook uses a narrower phrase: "stock exchanges and depositories, together known as Market Infrastructure Institutions". In that context SEBI has directed the MIIs to establish a common Online Dispute Resolution (ODR) portal for conciliation and arbitration, extending a mechanism that previously covered only broker-client disputes to all specified intermediaries.

MIIs also carry ongoing transparency duties: complaints and their redressal must be disclosed by the 7th of the succeeding month, and an exchange must disclose the corpus of its Investor Protection Fund on its website and update it monthly, with a half-yearly review by the end of March and September of whether that corpus is adequate.

The practical point for a currency derivatives candidate is that the trade guarantee that makes exchange traded derivatives free of counterparty credit risk is an MII function. It is not the broker's promise; it is the clearing corporation's.

CSCRF list of MIIs (five):
  Stock Exchanges
  Depositories
  Clearing Corporations
  KYC Registration Agencies (KRAs)
  Qualified Registrars and Transfer Agents (QRTAs)

ODR chapter usage (two):
  Stock exchanges and depositories

A client in Nashik disputes Rs 42 lakh with his broker over currency futures trades: he claims Rs 30,00,000 and the broker counter-claims Rs 12,00,000. He goes through the MII-administered machinery.

Step 1 — the intermediary. He must first approach the broker itself.

Step 2 — the exchange, then SEBI. Unsatisfied, he complains to the stock exchange of which the broker is a member, and then on SCORES.

Step 3 — the common ODR portal, which SEBI directed the MIIs to establish. Conciliation is attempted first.

Step 4 — arbitration, and here the rupee arithmetic decides the forum:

Claim         = Rs 30,00,000
Counter-claim = Rs 12,00,000
Aggregate     = Rs 42,00,000

Because the aggregate of claim and counter-claim exceeds Rs 30,00,000, the matter goes not to a sole arbitrator but to an Arbitral Tribunal of three arbitrators, appointed within 5 calendar days of reference and receipt of fees. The award is due within 30 calendar days of appointment, extendable by a further 30 for reasons recorded in writing.

Had the claim been Rs 8,00,000 with no counter-claim, a sole arbitrator would have been appointed within 5 calendar days, with the same 30-day award deadline. Had it been Rs 1,00,000 or less, the sole arbitrator would have conducted a document-only arbitration, with no hearing unless he chose to grant one.

Rs 30 lakh is a threshold on the aggregate, not on either side alone — a Rs 25 lakh claim met by a Rs 10 lakh counter-claim still goes to a three-member tribunal.

MIIs appear in two chapters of Series I and the wording differs in each, which is exactly what gets tested. Chapter 7 (Clearing, Settlement and Risk Management), section 7.12, gives the CSCRF list of five. Chapter 10 (Codes of Conduct and Investor Protection Measures), section 10.2.1, uses the narrower "stock exchanges and depositories" formulation when introducing the ODR portal, and Chapter 10 also carries the complaint-disclosure and IPF-corpus duties.

The examinable question is usually "which of the following is a Market Infrastructure Institution?" — and when KRAs or QRTAs appear among the options, the answer turns on whether the question is anchored in the cyber framework. Read the stem for CSCRF before answering.

• Two different lists, both correct in their own context. CSCRF names five; the grievance chapter names two. A question that mentions cyber security means the list of five.
• A broker is not an MII. Nor is a depository participant, a KRA's client, or a registered intermediary — they are regulated entities that use the infrastructure. The CSCRF applies to brokers and DPs too, but as regulated entities, not as MIIs.
• Clearing corporation and exchange are different institutions with different jobs. The exchange brings buyer and seller together; the clearing corporation settles with a trade guarantee by becoming the central counterparty through novation.
• Rs 30 lakh is an aggregate threshold for the arbitration forum — claim plus counter-claim, not either alone.
• The ODR route is not the first step. The investor must approach the intermediary, then the exchange or SCORES, before ODR.
• MII status is about systemic importance, not size. It is why these entities carry cyber, disclosure and grievance obligations that ordinary intermediaries do not.