[Answered] Market Infrastructure Institutions (MIIs) suffer from the conflicting nature of different roles. Elaborate.

Stock exchanges, depositories and clearing houses are all Market Infrastructure Institutions (MIIs) and constitute a key part of the nation’s vital economic infrastructure.  Market   Infrastructure   Institutions   (MIIs)   are   unique   institutions providing   vital infrastructure of trading, settlement and record keeping. They are vested with regulatory responsibilities, while pursuing commercial interests like other profit- oriented entities

Conflicting nature of different roles:

• MIIs also perform a unique dual role. On the one hand, MIIs are corporate entities wherein attention to bottom line of their business is a natural outcome. On the other hand, as a first line regulator, MIIs carry out the key regulatory and public utility functions.
• Given their  vital  role  in  the  capital  market ecosystem,  they  cannot  engage  themselves exclusively in  pursuit  of  profits  which  results in dilution of their focus on the regulatory role.
• At the same time, they have to be viable institutions generating sufficient surpluses to effectively discharge their role of public utility with an eye on robust investor protection. The business model of an MII is thus inherently conflicting.
• Misgovernance is another challenge with MIIs.
• Every key management person’s appointment decision of exchanges is controlled by the regulator (government).
• Personnel at MIIs have begun to behave like civil servants. E.g. not taking decisions and pushing every small question up through the hierarchy and get multiple signatures. This has hampered operational capability.
• Exchanges and MIIs in India can no longer be described as autonomous organisations as they lack in rapidly taking decisions.

Well-functioning MIIs, constitute “the nucleus of the capital allocation system”, are indispensable for economic growth and have a net positive effect on society like any other infrastructure institution.