SEBI Proposes API-Based STP Framework to Reduce Costs and Latency

The Securities and Exchange Board of India (SEBI) has proposed changes to the existing Straight-Through Processing (STP) framework. The regulator aims to replace the current centralised hub-based system with a decentralised API-based model.

The proposal is intended to improve efficiency, reduce costs, and lower latency in financial message processing. Public comments on the consultation paper have been invited until June 9, 2026.

Proposed Shift To API-Based Architecture

SEBI has proposed eliminating the current STP Centralised Hub used for routing messages between STP Service Providers (SSPs). Under the new framework, SSPs would connect directly through Application Programming Interface (API)-based systems.

This would allow secure and seamless exchange of messages without relying on a central intermediary. The change is expected to reduce dependency on a single infrastructure point and streamline communication.

Standardisation And Operational Framework

The proposal requires SSPs to establish standardised API endpoints based on agreed data formats and protocols. This standardisation aims to ensure interoperability across different systems within the financial ecosystem.

It would allow efficient data exchange while maintaining security and consistency in operations. The regulator stated that the revised structure would support scalability and handle institutional trading volumes effectively.

Concentration Risk and System Limitations

SEBI highlighted that 95–99% of STP traffic between April 1, 2025, and December 31, 2025, was routed through a single SSP. This high concentration creates risks associated with dependency on a single service provider.

Additionally, the current hub-based structure introduces a single point of failure in the system. These limitations reduce resilience and could impact operations during disruptions.

Impact On Market Participants and Efficiency

The proposed framework does not require any changes for end users such as stock brokers, custodians, or fund houses. However, it is expected to encourage participation from more SSPs, reducing concentration in the ecosystem.

Lower latency and reduced processing costs could improve operational efficiency across participants. SEBI also proposed an optional API-based communication facility for users under the same SSP to minimise manual intervention and errors.

Read More: SEBI Clarifies Non-Discretionary PMS Clients to Pledge Demat Securities.

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Conclusion

SEBI’s proposal to shift from a centralised STP hub to a decentralised API-based model reflects a structural change in financial message processing. The move is aimed at improving system resilience by reducing single points of failure and concentration risk.

It also targets efficiency gains through lower costs, faster processing, and enhanced scalability. The consultation process will determine stakeholder feedback before potential implementation of the revised framework.

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