Mumbai: The Securities and Exchange Board of India (Sebi) on Wednesday directed stock exchanges and clearing corporations to implement within six months a new policy for outsourcing any exchange-level activity.
Sebi said stock exchanges and clearing corporations often take help of third-party service providers and agencies to carry out certain processes and therefore, they must formulate an outsourcing policy approved by their respective boards of directors.
Stock exchanges and clearing corporations will have to develop a process for determining the materiality of outsourcing arrangements with an emphasis on the potential impact on the market, including where the service provider/outsourced agency fails to perform, Sebi said in a circular.
The market watchdog, however, said that core and critical activities cannot be outsourced.
In case there are sub-contracts involved, stock exchanges will need to ensure that outsourced activities are further outsourced downstream only with the prior consent of the exchange and that too with appropriate legal safeguards.
“Stock exchange and clearing corporations shall also consider the ability of the sub-contractor to perform the services as a part of the due diligence process," read the Sebi circular.
While framing its outsourcing policy, the stock exchange or the clearing corporation will have to evaluate its aggregate exposure to a particular service provider or outsourced agency, Sebi said.