SEBI Eases Technical Glitch Rules: Exempts 60% of Stock Brokers

The capital market regulator, the Securities and Exchange Board of India (SEBI) has undertaken a series of measures to create a conducive regulatory environment for stock brokers on Jan 9, 2025. These new rule aims to enhance ease of compliance and, in turn, facilitating ease of doing business for market intermediaries. In addition to this objective, SEBI reviewed the existing technical glitch framework applicable to stock brokers.

Based on public consultation and based on feedback received from stakeholders, the technical glitch framework has been revised to align with the objective of simplifying compliance for stock brokers. The key changes are as follows:

Streamlined Eligibility Criteria

The applicability of the technical glitch framework has been refined to exclude smaller stock brokers, particularly those with a limited scale of operations and lower reliance on technology. The framework will now apply only to stock brokers with more than 10,000 registered clients. As a result of this revised criterion, approximately 60% of stock brokers will move out of the framework, significantly reducing their overall compliance burden.

Exemptions from Applicability of Technical Glitches

The revised framework introduces specific exemptions from compliance requirements. Glitches that originate outside a stock broker’s trading architecture, those that do not directly impact trading functionality, and incidents with negligible impact have been excluded from the framework. This provides immunity to stock brokers for glitches that are beyond their control and do not impair their ability to deliver seamless services.

Simplified Reporting Requirements

Reporting norms have been eased by extending the timeline for reporting technical glitches from one hour to two hours, factoring in trading holidays. Further, the reporting process has been streamlined by shifting from reporting to multiple exchanges to a single Common Reporting Platform.

Rationalised and Cost-effective Technology Requirements

Technology compliance requirements have been recalibrated based on the size of stock brokers and their dependence on technology. This includes rationalisation of requirements related to capacity planning, disaster recovery (DR) drills, and other related obligations.

Rationalisation of Disincentive Structure

The financial disincentive framework has been rationalised by considering applicable exemptions, the nature of glitches, whether major or minor, and the frequency of such occurrences.

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