Sebi Issues Framework To Tackle Tech Glitches On Stock Brokers' Platforms

As per reports, the framework will come into effect from 1st April 2023

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By Teena Jose • Nov 11, 2022 Originally published Nov 11, 2022

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The Securities and Exchange Board of India (SEBI), on Friday, issued a framework to address the technical glitches in stock brokers' electronic trading systems. As per reports, the framework will come into effect from 1st April 2023, under which stock brokers will have to inform about any malfunction in their system or the one outsourced from any third parties, leading to stoppage, slowdown of operations for five minutes or more, to the stock exchanges within one 1 hour from the time of occurrence of the glitch.

The framework is said to address the factors that include new reporting requirements, financial disincentives for stock brokers facing technical glitches, capacity planning and software testing.

The market regulator reportedly said that rapid technological developments have increased the ease of electronic trading in securities markets, technology related interruptions and glitches and their impact on the investors' opportunity to trade have become a major technology related risk.

"In the wake of the growing number of such incidents, SEBI constituted a working group to recommend suitable measures to address the issue. Based on the recommendations of the working group and views obtained from stakeholders and industry experts, it has been decided to put in place the following framework to deal with technical glitches", Sebi said in a circular.

As per the framework, it is said that the stock brokers will have to make sure that all software changes that are occurring in their applications are rigorously tested before they are used in the production system. Also, the stock brokers will have to monitor peak load in their trading applications, servers and network architecture and the installed capacity will be at least 1.5 times of the observed peak load.

The reports stated that the regulator said that increasing the number of investors may create additional burden on the trading system, stock brokers will need adequate capacity planning to provide continuity of services to their clients.

"Stock exchanges in consultation with stock brokers will have to decide upon Recovery Time Objective (RTO), the maximum time taken to restore operations from Disaster Recovery Site (DRS) after declaration of disaster and, Recovery Point Objective (RPO), which is the maximum tolerable period for which data might be lost due to a major incident," the framework said.

Teena Jose

News Desk Reporter with Entrepreneur India

Teena is a post graduate in financial journalism. She has an avid interest in content creation, digital media and fashion.

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