The Securities and Exchange Board of India (Sebi) on Tuesday proposed a major overhaul of the existing Straight-Through Processing (STP) framework, replacing the current centralised hub-based structure with a decentralised Application Programming Interface (API)-based model. This initiative aims to reduce costs, lower latency, and improve service delivery for market participants, as reported by PTI.
Key Features of the Proposed Framework
In a consultation paper, Sebi proposed removing the current STP Centralised Hub, which is used for transferring messages between different STP Service Providers (SSPs). Under the new framework, message exchanges would occur through direct API-based connectivity between SSPs. This means that SSPs serving different STP users will need to provide standardised API endpoints based on agreed protocols and data formats, enabling secure and seamless message exchange without routing through a centralised system.
Sebi stated that this change would enhance the scalability and cost-effectiveness of the STP framework while supporting the transaction volumes of institutional trading. The regulator also noted that the proposed changes would not require any modifications at the end-user level, including for stock brokers, fund houses, and custodians.
Concentration Risk and Single Point of Failure
Sebi's analysis of STP traffic between April 1 and December 31, 2025, revealed that 95-99 per cent of all STP messages were routed through a single SSP, creating a significant concentration risk. Additionally, because inter-SSP messages currently move through a single STP Hub, the framework faces the risk of a potential single point of failure. The cost and latency involved in routing messages through the central hub could encourage market participants to consolidate operations with a single SSP, worsening the concentration issue.
Furthermore, Sebi noted that negligible traffic through the STP Hub indicated it was no longer serving its intended purpose of enabling broader interoperability. The revised structure would likely encourage more SSPs to participate, thereby mitigating concentration risk and improving value-added services for STP users.
Optional API-Based Mechanism for Same-SSP Users
To improve operational efficiency further, Sebi also proposed an optional API-based message exchange mechanism for STP users serviced by the same SSP. This additional mechanism would complement existing upload and download systems, helping to minimise manual intervention, reduce human errors, and improve security.
Sebi has invited public comments on the proposals until June 9.
