On 18 May 2026, the market regulator Securities and Exchange Board of India (SEBI) made a proposal regarding changes to its Straight Through Processing (STP) framework for institutional trades. The proposal is aimed at reducing delays, lowering costs and improving service delivery for the market participants.
SEBI, on 18 May, issued a consultation paper proposing a shift from the prevailing centralized STP messaging framework to a direct Application Programming Interface (API)-based system for communication between STP Service Providers (SSPs).
The STP framework is an electronic system. Basically, this system facilitates the automated end-to-end processing of financial instrument transactions and the exchange of trade-related messages, including Electronic Contract Notes, among stock brokers, custodians and institutional investors. Currently, SEBI noted, messages exchanged between different SSPs must pass via centralized STP Hub.
In this setup, stock brokers send messages through a sender SSP while custodians and institutional investors receive them via a receiver SSP. SEBI highlighted that this architecture increases transmission time as well as costs because messages must be routed through the hub.
Additionally, the regulator pointed out that between period 1 April 2025 and 31 December 2025, approximately 95% to 99% of STP messages were routed through a single SSP which creates concentration risk and potential for a single point of failure. To address these concerns, the market watchdog has proposed to replace the centralized hub for message transfer between SSPs with a direct framework that is API-based.
Under the proposed model, SSPs would send messages to each other via standardized API endpoints rather than routing them through the hub. SEBI said that this would also enhance scalability and cost-effectiveness of STP framework while supporting the transaction volumes of institutional trading. It said that the proposed framework would not require system upgrades by users of STP, such as stock brokers, institutional investors and custodians and would likely draw more SSPs to join.
SEBI has also proposed an optional API-based message exchange facility for STP users serviced by the same SSP. It is expected to reduce human errors and improve operational ease in addition to the existing upload and download mechanism.
The standard operating procedure for SSPs will be prepared by the Industry Standard Forum of Market Infrastructure Institutions. The forum will determine the operational modalities for the proposed framework after consulting with the market watchdog. Till 9 June 2026, the regulator invites public comments on the consultation paper.
Source: Live Law Biz
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