SEBI Proposes Changes to Technical Glitch Framework for Stockbrokers

Source: ET

Context:

Currently, any malfunction in a stockbroker’s electronic trading system is classified as a “technical glitch.” This framework applies to all brokers, regardless of size or client base.

Key Proposed Changes

1. Redefinition of Technical Glitch
   • Excludes malfunctions after trading hours and issues beyond the control of stockbrokers.
2. Applicability Threshold
   • Applies only to brokers:
     • Providing internet-based trading platforms
     • Having more than 10,000 clients as of March 31 of the previous financial year
   • Result: 457 small stockbrokers will now be excluded, reducing compliance burden.
3. Financial Disincentive Adjustments
   • Brokers will not face penalties for glitches that do not materially affect client services
   • Example: Minor operational issues with negligible impact
4. Disclosure and Transparency
   • Stock exchanges should rationalise financial disincentives
   • Instances of technical glitches should be disclosed on their websites
5. Capacity Planning Requirements
   • Stockbrokers must ensure adequate infrastructure to handle increased investor load
   • Requires monitoring of peak load across trading applications, servers, and networks