Brokers hope for relaxation as Sebi, exchanges likely to review norms defining a technical glitch

Further relaxation on technical glitch norms for brokers? SEBI and exchanges to review it again

Capital market regulator Sebi, brokers and stock exchanges are in talks to further relax norms regarding technical glitches at brokers’ systems, people familiar with the development told Moneycontrol.

While a circular dated March 28 saw exchanges relax various provisions but brokers were not satisfied as various issues were still unaddressed, hence fresh discussions have been started on the issue.

“Sebi and exchanges have given positive response, to look into some of the key issues raised by the industry, but they have also clarified that any glitch in trading, settlement and risk management will not be tolerated,” one industry source said.

As per Sebi’s definition, a technical glitch includes a malfunction in a broker’s systems - whether hardware, software, network, processes, or electronic services - for five minutes or longer, including even slowdowns or deviations from normal system operations.

The brokers had made a representation earlier to Sebi and exchanges urging that issues at the back office should not be counted as a technical glitch, but the exchanges in the March 2025 circular included them under glitch. The circular said that any event which may affect trading, settlement or decision making of the client etc will be treated as technical glitch.

Brokers had also requested that if alternative tools for trading are available i.e. online is working but the app has an issue, in such a case, the problem should not be counted as a glitch. However, this request too was not considered in the March circular.

Brokers had another request that said that a technical issue should not be treated as a glitch unless 10 percent of clients or orders are affected, but that request was declined. The circular said an incident which falls under the definition of technical glitch will be considered so, irrespective of the number of clients or orders affected.

Stock brokers also want the time taken to call an issue as a glitch to be reviewed and raised to 15 minutes as against 5 minutes as of now. The exchange circular said that any glitch event which may lead to either stoppage, slowing down or variance in normal functions, operations or services of system of a stock broker for a continuous period of 5 minutes or more will be reported as technical glitch. But brokers claim that most of the times, it is difficult to understand the problem in the short five-minute period.

Another request by brokers sought that if a glitch happens due to services of a third party or vendor, then the broker should not be held liable. This issue was not considered, and the exchange circular said that any glitch incident which falls under the definition of a technical glitch will be considered as a glitch even if it is on account of a third-party service provider or vendors’ issue.

Moneycontrol has learnt that the brokers have also sought a bifurcation of glitches into soft technical glitch and critical technical glitch. If a soft technical glitched has occurred, there should not be any disciplinary action on broker, and only monetary penalty should be levied. One industry insider said, “The industry forum has discussed some tweaks but the final call will be taken by exchanges in consultation with Sebi.”

An email sent to Sebi did not elicit response till the time of publishing the story.

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In the March 2025 circular, exchanges had given some relaxation such as if technical charts, suggestions, news etc. are hampered, it will not be considered as a glitch. Issues in price up-dation but latest price being available on refresh was removed from the list of technical glitches. Instances where brokers are not at fault but a technical glitch occurs will no longer attract financial penalties. Additionally, exchanges introduced an upper limit of Rs 5 lakh for large brokers and 1 lakh for small brokers on penalties for failure to disclose glitches.