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SEBI issues framework to address technical glitches at stock brokers

Stock brokers frequently face technical issues on the trading terminals offered by them to their clients, which in many instances has resulted in monetary losses for clients.

Mumbai / November 25, 2022 / 06:14 PM IST
Technical glitch shall mean any malfunction in the systems of the stock broker including malfunction in its hardware, software, networks, processes or any products or services provided by the stock broker in the electronic form.

Technical glitch shall mean any malfunction in the systems of the stock broker including malfunction in its hardware, software, networks, processes or any products or services provided by the stock broker in the electronic form.

 
 
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The Securities and Exchange Board of India (SEBI) on November 25 issued a new framework to cut down on instances of technical glitches being faced by stock brokers in India.

The measures including new reporting requirements, financial disincentives for stock brokers facing technical glitches, capacity planning, and software testing among others will become applicable from April 1, 2023.

Stock brokers frequently face technical issues on the trading terminals offered by them to their clients, which in many instances has resulted in monetary losses for clients.

Several stock brokers including the likes of Zerodha have undergone major and minor technical glitches in recent years.

The capital market regulator had constituted a working group to recommend suitable measures to address the issue of technical glitches at stock brokers.

Technical glitch shall mean any malfunction in the systems of the stock broker including malfunction in its hardware, software, networks, processes or any products or services provided by the stock broker in the electronic form, SEBI said in a notice.

The working group of SEBI has recommended that stock brokers should report any technical glitch in their trading system within an hour of such an instance occurring. Further, the broker must submit a preliminary report on the event within 24 hours and a root cause analysis report within 14 days.

The regulator has asked stock brokers to undertake a capacity planning exercise for their entire trading infrastructure including enhancing their capacity to 1.5 times the peak load capacity of the stockbroker.

“To ensure the continuity of services at the primary data centre, stock brokers as may be specified from time to time by stock exchange shall strive to achieve full redundancy in their IT systems that are related to trading applications and trading related services,” SEBI said.

In order to improve the monitoring mechanism of the IT systems of stock brokers, SEBI has directed the stock exchanges to create a Logging and Monitoring Mechanism to be operated between the exchange and the stock broker’s trading system.

“Under this mechanism, specified stock brokers shall monitor key systems and functional parameters to ensure that their trading systems function in a smooth manner,” SEBI said.

The stock exchanges have also been asked by SEBI, to independently monitor key parameters to gauge the health of the trading systems of the specified stock brokers.

Stock brokers with a minimum client base across the exchanges, as may be specified by stock exchanges from time to time, shall mandatorily establish business continuity or disaster recovery set-up, the regulator said.

Further, the regulator has directed stock exchanges to put in place a structure of financial disincentives applicable to stock brokers for technical glitches occurring in their trading systems and non-compliance with the provisions.
Moneycontrol News
first published: Nov 25, 2022 05:47 pm