The Securities and Exchange Board of India (SEBI) has revised its framework for dealing with technical glitches at stock brokerage firms, giving major relief to small brokers. Under the new rules, the technical glitch framework will now apply only to brokers who have more than 10,000 registered clients. This change effectively removes nearly 60 per cent of brokers from strict reporting and penalty requirements related to technology failures.
SEBI said the move is aimed at reducing the compliance burden on smaller market intermediaries while ensuring that systemically important brokers continue to maintain strong technology safeguards. Smaller brokers had raised concerns that the earlier rules treated all firms alike, regardless of size, scale, or technological capacity.
As per the revised framework, not all technology-related issues will be treated as “technical glitches.” Problems that do not impact actual trading, such as back-office disruptions, issues caused by third-party vendors, or minor interface errors, will no longer attract regulatory action. SEBI clarified that only glitches affecting order placement, execution, or critical trading systems will come under the framework.
The regulator has also relaxed reporting timelines. Brokers will now get up to two hours to report a technical glitch, compared with the earlier one-hour limit. Reporting will also become simpler, with brokers required to use a common reporting platform instead of multiple exchange-specific systems. Brokers must inform stock exchanges as well as their clients within the stipulated time if a serious disruption occurs.
In addition, SEBI has rationalised several technology-related requirements, including capacity planning and disaster recovery drills. These obligations will now be proportionate to the size and client base of the brokerage. Financial penalties for glitches will also be assessed after considering exemptions and the nature of the disruption.
Market participants have welcomed the move, saying it strikes a better balance between market stability and ease of doing business. The revised framework comes into effect immediately and reflects SEBI’s effort to adopt a more practical and risk-based regulatory approach.
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