The Securities and Exchange Board of India (SEBI) has proposed a major transformation of institutional trade processing infrastructure through a new API-based framework. According to the consultation paper issued on Tuesday, May 19, 2026, the regulator plans to replace the existing centralized trade-processing hub with a direct communication framework using application programming interfaces (APIs). This API-based approach would allow service providers to communicate directly with each other instead of routing messages through a central hub, addressing current operational inefficiencies. The proposed changes would not require major system-level modifications for brokers, custodians, institutional investors and other STP users, making the transition seamless for market participants. As per SEBI's latest consultation paper, the regulator has proposed revised operational guidelines, obligations, code of conduct, eligibility conditions, and standard operating procedures for STP Service Providers through draft guidelines titled "SEBI (STP Service Providers and associated API-based connectivity between STP Service Providers) Guidelines, 2026."
SEBI has proposed significant relaxation in mandatory call recording requirements for research analysts interacting with institutional investors. According to the consultation paper released on Monday, May 19, 2026, the regulator plans to remove the requirement to maintain call recordings of interactions with institutional investors, while maintaining complete communication records for retail and other non-institutional clients. At present, research analysts are required to preserve records of all communication with clients and prospective clients for a period of 5 years, including telephone recordings, emails, SMS messages, and other legally verifiable documents. The proposed relaxation is limited to institutional investors, as SEBI noted that institutional investors generally have established due diligence systems and the ability to independently assess research reports. The regulator has proposed amendments to the SEBI (Research Analysts) Regulations, 2014, along with related provisions under the Master Circular for Research Analysts, and plans to align the definition of "institutional investor" with the definition under the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.
The existing Straight Through Processing (STP) system, which handles trade-related messages between brokers, custodians and institutional investors, faces significant operational challenges. Based on traffic analysis between April 1 and December 31, 2025, SEBI noted that over 95%-99% of all STP messages were routed through a single STP Service Provider (SSP), thereby increasing concentration risk. The mechanism is mandatory for institutional trades that are settled through custodians, with communication between different service providers passing through a central hub before reaching the intended participant. This arrangement adds extra transmission time and results in higher charges for market participants. SEBI observed that the present architecture, which routes inter-SSP communications through a centralized STP Hub, results in higher latency, additional transmission costs, operational inefficiencies, concentration risk, and potential single point of failure. The negligible volume of traffic passing through the STP Hub suggests that it is no longer serving its intended purpose of enabling broad-based interoperability.
The proposed framework would deliver substantial improvements in operational efficiency and cost reduction. According to SEBI's consultation paper, the direct communication approach would improve operational efficiency, scalability and resilience while reducing costs for market participants. The regulator emphasized that this change would not require system modifications for brokers, custodians, institutional investors and other STP users, making the transition seamless for market participants. The move would strengthen the institutional trade-processing system while addressing the current inefficiencies that have plagued the system for years. As per SEBI's latest proposal, the proposed framework would reduce latency and costs, improve scalability, strengthen operational resilience, and support institutional trading volumes without requiring system changes for STP users such as brokers, custodians, and institutional investors. The approach would require SSPs serving different STP users to enable standardized API endpoints, adhering to agreed-upon protocols and data formats, thus enabling seamless and secure exchange of messages and data without routing through a centralized hub. The proposal 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 has initiated structured public consultation processes for both the API framework and call recording relaxation proposals. For the API framework, public comments on the proposal have been invited until June 9, 2026, while for the call recording relaxation, public comments are sought until June 8, 2026. This consultation period will help refine both frameworks before implementation, ensuring that the final systems address all stakeholder concerns and operational requirements while addressing the growing concentration risk in the current market infrastructure ecosystem. The consultation process includes online web-based form access through the following link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComments=yes. In case of technical issues, comments can be emailed to Darshil Bhatt (darshilb@sebi.gov.in), Harshad Patil (harshadp@sebi.gov.in), and mrd tpd@sebi.gov.in, mentioning the subject as "Easing of framework for Straight Through Processing (STP) of trades" for the API framework and "Relaxation in call recording rules for research analysts" for the call recording proposal.
