India’s Securities and Exchange Board of India (SEBI) has suggested a significant overhaul of the institutional stock market trade-processing system to enhance efficiency and reduce costs. The proposal aims to replace the current centralized Straight Through Processing (STP) hub model with a direct communication framework based on application programming interfaces (APIs). SEBI highlighted that the existing structure leads to delays, higher operational expenses, and concentration risks in the market infrastructure.
The STP system facilitates the exchange of trade-related messages among brokers, custodians, and institutional investors, ensuring seamless transactions. SEBI expressed concerns about the additional latency, increased costs, and the dominance of a single service provider in handling 95-99% of STP traffic. The regulator emphasized the need for a more direct communication approach through APIs to boost operational efficiency, scalability, and system resilience while cutting down expenses.
Under the proposed framework, service providers would communicate directly through APIs, eliminating the need for a central hub. SEBI assured that the suggested changes would not necessitate major system-level modifications for brokers, custodians, or institutional investors. Additionally, SEBI suggested the option for API-based communication among users of the same service provider to reduce reliance on manual processes vulnerable to errors.
SEBI has invited public feedback on the proposal until June 9 to gather input from stakeholders and industry participants.
