Market participants have welcomed the National Stock Exchange (NSE) directive stopping order confirmation through the use of interactive voice response (IVR).
Sources told Moneycontrol that the IVR led confirmation could have been easily misused by brokers and their agents to run trades that are not okayed by clients and could also have placed unnecessary trading barriers for some investors.
On March 13, NSE issued a circular prohibiting the initiating and confirming an order through an IVR. The exchange has asked brokers to ensure compliance with the circular by May 15, 2025.
The circular said, "It has been observed that certain trading members initiate buy/sell order(s) on behalf of the clients and communicate to the clients through IVR (Interactive Voice Response) system. Such clients are asked to press a predefined number/ option during the said IVR call to obtain the confirmation of order placement."
For example, the recorded call sent the client through the IVR system could say, "Buy 50 shares of XYZ Ltd. at Rs 200. If you wish to proceed with buying, Press 1." OR "There is a credit balance of Rs 1,00,000/- in your account with us. Select Option/Press 1 to buy Liquid Bees of the said amount".
The circular clarified that orders initiated by the trading members (stock brokers) on behalf of clients through the IVR system and considering pressing a predefined number / option as order confirmation will not be considered as legally verifiable record of order placement.
According to a market insider, the direction from the exchange can now stop any possible misuse of client accounts by brokers.
"A broker can record a buy call as a sell one, by simply claiming that the client chose the latter option. How would you know which number the client chose? It is ultimately the broker's system that records the number. Therefore, to avoid any such misuse, brokers are being asked to submit human-to-human voice recording as order confirmation via phone calls, not automated ones or IVR-led ones," said a senior brokerage executive.
An insider explained that the IVR systems are largely set up by brokerages who have their own research desks. The client can then subscribe to getting trading calls, and these trading call alerts can either be sent through email/SMS/app-based notifications or through IVR recordings.
He said that, with these subscription services, IVR led systems can be confusing if they interact in a language unfamiliar to the user. "What if the client whose mother tongue is Hindi is living in Bengaluru? Then the IVR will map him/her according to the locality and send him recorded messages in Kannada. How could he/she then take a call based on that?"
The circular has reiterated the modes of confirmation that are acceptable.
It said, "The following modes have been prescribed for order placement by the Trading Members on behalf of clients: -
a. Physical record written & signed by client,
b. Telephone recording,
c. Email from authorized email id,
d. Log for internet transactions,
e. Record of SMS messages,
f. Any other legally verifiable record."
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