SEBI’s ITRI: Global test for India’s future-ready financial architecture

Why in the News

The Securities and Exchange Board of India (SEBI) has introduced an IT Resilience Index (ITRI) to assess the technological robustness of Market Infrastructure Institutions (MIIs), meaning stock exchanges, depositories and clearing corporations. The index responds to growing global concern about outages and cyberattacks at systemically important financial market infrastructure. It follows comparable resilience frameworks already adopted by regulators in the United Kingdom, the European Union, the United States, Singapore, Hong Kong and Australia. The tension is between certifying resilience on paper through a scored index and ensuring MIIs make the operational investment the index is meant to incentivise.

What does the ITRI assess?

1. Nine weighted parameters: The index scores each market infrastructure institution across nine parameters covering system uptime, cyber-incident preparedness, disaster recovery capability and related technology governance measures.
2. Comparative design: SEBI has drawn on resilience frameworks used by regulators in the United Kingdom, the European Union, the United States, Singapore, Hong Kong and Australia in constructing the index.

What challenges does the index face?

1. Score versus substance: A scored index can be gamed toward compliance rather than genuine resilience if the underlying audit process is not independently verified. Fix. SEBI could mandate third-party technical audits of the evidence behind each parameter score, rather than institutional self-certification.
2. Uneven capacity across MIIs: Smaller regional depositories and clearing corporations may lack the technology budgets of the largest exchanges, risking a two-tier resilience regime. Fix. A phased compliance timeline calibrated to institution size would let smaller MIIs close the gap without a single hard deadline forcing under-preparation.

Conclusion

SEBI’s IT Resilience Index brings India’s market infrastructure oversight in line with international regulatory practice on financial technology risk. Its real test lies in the credibility of its scoring process and in whether it drives measurable investment in resilience rather than a compliance exercise.

Back2Basics: Market Infrastructure Institutions (MIIs)

1. MIIs are the entities that provide the trading, clearing and settlement backbone of the securities market: stock exchanges, depositories and clearing corporations.
2. They are classified as systemically important, since their failure or compromise can disrupt trading and settlement across the entire market rather than a single participant.
3. SEBI regulates MIIs under the SEBI (Stock Exchanges and Clearing Corporations) Regulations and the SEBI (Depositories and Participants) Regulations.

Matching Previous Year Question

“[2015, GS2, 12 marks] For achieving the desired objectives, it is necessary to ensure that the regulatory institutions remain independent and autonomous. Discuss in the light of the experiences in recent past.”