The Securities and Exchange Board of India (Sebi) has proposed a major relief for the brokers on technical glitch framework. As per the proposal disruptions caused by global cloud service providers, glitches at market infrastructure institutions (MIIs), delays in KYC processing, back-office issues not affecting trading, payment gateway failures at banks or aggregators, and problems in decision-support tools such as charts or reports will not be counted as technical glitch. Sebi has issued a draft circular on the same and has sought public feedback on the same by October 2, 2025. The revised definition of technical glitch is expected to bring more clarity and ease the compliance.
Through Sebi has not changed the 5-minute time interval for consideration as a technical glitch. Sebi draft circular said, “Technical glitch shall mean any malfunction in the electronic system of stock broker, including malfunction in its hardware, software, networks/bandwidth, processes or products or services, directly or indirectly related to trading and risk management, occurred during trading session of stock exchange. The malfunction in the systems of stock brokers or the one outsourced from any third parties, which may lead to either stoppage, slowing down or variance in the trading and risk management functions such as log-in, order placement (including modification, cancelation, execution, confirmation, status), allocation and viewing of margin/ collateral/ funds etc., for a contiguous period of five minutes or more.”
Moneycontrol had reported on June 26 that brokers have requested exchanges and Sebi to further ease the technical glitch reporting norms, seeing the practical difficulties. Sebi had issued a framework in December 2022 and after the inputs from industry exchanges had issued revised circular in March this year.
Sebi paper said,” Sebi received several representations from the various stakeholders and Industry forum regarding need to review the present framework on technical glitches. The feedback received from the stakeholders, stock exchanges and data on the technical glitches were discussed in Stock brokers ISF and their recommendations were analysed”. Sebi paper further said, “Based on the feedback and the analysis of data, it has been decided to review extant framework of technical glitches at stock broke systems”.
The framework will apply only to brokers offering internet-based or securities trading through wireless technology (IBT/STWT) platforms with more than 10,000 clients. This effectively exempts around 457 smaller brokers, easing their compliance burden given their limited technology exposure. Rationalization of reporting of technical glitch to Stock Exchange is proposed to be eased considering reasonable time require to report and considering trading holidays etc. Further, reporting is proposed to be done at the Common Reporting platform to avoid the multiple reporting by stock brokers.
Reporting norms have also been streamlined. Brokers must notify exchanges and clients about glitches within two hours and file a preliminary incident report by the next trading day. A root cause analysis must follow within 14 days. All reports will be routed through a common platform, Samuhik Prativedan Manch, to avoid duplication.
Sebi has also proposed that financial disincentive will also be rationalised. The regulator has also proposed rationalisation of financial disincentives. Minor glitches or those affecting only one mode of trading (mobile or web) while the other remains functional will not attract penalties. Exchanges, in consultation with Sebi, will issue detailed guidelines.
Sebi has emphasised that brokers must undertake robust capacity planning and rigorous testing of software changes to prevent disruptions. Exchanges will continue monitoring systems through the API-based Logging and Monitoring Mechanism (LAMA). Disaster recovery and business continuity norms are also being reviewed.
The proposed changes aim to balance investor protection with operational ease for brokers, as rising investor participation continues to test the resilience of trading platforms.
Alos read: Sebi keen to relax punching errors in trades but concerned over tax evasion, circular trading
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