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Informist, Tuesday, May 19, 2026

 

--SEBI mulls easing framework for straight through processing of trades 

 

MUMBAI – The Securities and Exchange Board of India has proposed to do away with the centralised hub framework for straight-through processing of trades. SEBI wants to replace it with an application programming interface-based framework.

 

Straight-through processing is a mechanism that automates end-to-end processing of transactions of financial instruments and allows electronic capturing of transactions from origin to final settlement. "STP (straight-through processing) is used for various messages being exchanged across market participants like Stock Brokers, Custodians and/or Institutional investors and includes Electronic Contract Note (ECN), amongst other messages," SEBI said in the consultation paper. The public can give their comments on the consultation paper by Jun. 9.

 

SEBI said different straight-through processing service providers for each user leads to transmission of information through a straight-through processing hub. Not only does this mean that the information transfer takes more time, but it also creates the risk of a single point of failure for all messages.

 

"Given the cost and latency implications of the messages flowing through STP Hub, there could be an incentive (in terms of low latency and cost) for market participants to consolidate their activities with one SSP (STP service provider), thereby aggravating the concentration risk associated with single significant SSP," SEBI said. "At the same time, miniscule volume of traffic currently flowing through the STP Hub suggests that it is no longer serving its intended purpose of broad-based interoperability, necessitating a more decentralized connectivity model."

 

The application programming interface-based framwork will require straight-through processing service providers to enable standardised application programming interface endpoints, which will allow secure exchange of messages and data without using a centralised hub. "The aforesaid proposal would not entail any change at the end of the STP users (i.e. stock brokers, fund houses, custodians etc.) and would likely encourage more SSPs to participate, thereby mitigating the concentration risk with single large SSP and improving value added services by SSPs to STP users," SEBI said.  End

 

Reported by Anshul Choudhary

Edited by Rajeev Pai

 

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