Ministry : Ministry of Finance (SEBI)

Review of Framework to address the _technical glitches_ in Stock Brokers_ Electr

Subject : ministry of finance

Review of Framework to Address ‘Technical Glitches’ in Stock Brokers’ Electronic Trading Systems

This SEBI circular revises the regulatory framework governing technical glitches in stock brokers' trading systems, marking a significant shift toward risk-based, proportionate regulation that eases compliance burdens while enhancing investor protection and system resilience.

Key Points

• The revised framework applies only to stock brokers offering internet-based trading (IBT/STWT) with more than 10,000 active clients as of March 31 of the prior financial year, exempting smaller brokers from compliance.
• Technical issues not originating within the broker’s control—such as disruptions at cloud providers, payment gateways, back-office non-trading functions, or during KYC processes—are explicitly excluded from being classified as "technical glitches."
• Reporting timelines are relaxed: brokers now have two hours (up from one) to inform exchanges and clients of a glitch, and must submit a Root Cause Analysis (RCA) within 14 working days, with all reports submitted via a Common Reporting Platform ("Samuhik Prativedan Manch").
• Financial disincentives will not apply if only one trading mode (e.g., mobile app) is affected while another (e.g., web) remains functional, or if the glitch is deemed minor in impact.
• Capacity planning, software testing, and Business Continuity Planning (BCP)/Disaster Recovery Site (DRS) requirements are to be rationalised based on broker size and technology dependency, with detailed guidelines to be issued by stock exchanges in consultation with SEBI.
• Stock exchanges must monitor broker systems via API-based Logging and Monitoring Mechanism (LAMA), publish reported glitches on their websites, and revise financial penalties considering glitch type, frequency, and exemptions.

A Proportionate, Risk-Based Overhaul of Tech Risk Regulation in Brokerage Systems

Effective January 9, 2026, SEBI’s updated framework significantly reshapes how technical disruptions in brokerage platforms are regulated by focusing oversight on larger, systemically relevant players and excluding peripheral or external failures. By streamlining definitions, extending reporting timelines, introducing a unified reporting portal, and tailoring requirements to firm size and tech reliance, the policy balances operational flexibility with investor safeguards. The move reflects a mature regulatory response to industry feedback and real-world incident data, promoting technological resilience without imposing one-size-fits-all costs. This recalibration positions India’s securities market infrastructure for greater scalability and reliability amid rising retail participation and digital trading volumes.