SEBI Proposes Changes to Technical Glitch Framework

The Securities and Exchange Board of India (SEBI) has released a consultation paper to review the existing framework for addressing ‘technical glitches’ in stockbrokers’ electronic trading systems. Earlier, in November 2022, SEBI had introduced a comprehensive framework through Circular No. SEBI/HO/MIRSD/TPD-1/P/CIR/2022/160, followed by detailed guidelines issued by the stock exchanges on December 16, 2022.

The definition of a “technical glitch” is now proposed to be revised, specifically excluding glitches that occur after trading hours or those beyond the control of stockbrokers. These include global system issues, new trading account processing, payment gateway failures, back-office problems, and malfunctions in decision support tools. Additionally, the financial disincentive mechanism will not apply to glitches with only a minor impact.

The scope of the framework is also being narrowed. It will apply only to stockbrokers offering Internet-Based Trading (IBT) or Securities Trading Using Wireless Technology (STWT) platforms with more than 10,000 registered clients as of March 31 of the preceding financial year. Reporting requirements are being streamlined by moving from a common email address to a Common Reporting Platform. The reporting timeline has also been extended from 1 hour to 2 hours, factoring in time requirements and trading holidays.

Further, the circular places greater responsibility on stock exchanges to issue detailed guidelines covering continuity planning, disaster recovery sites, monitoring mechanisms, and change management. SEBI has invited feedback on these proposals until October 12, with the revised framework scheduled to take effect from November 1, 2025.