As part of its continued focus on enhancing ease of compliance and facilitating ease of doing business, SEBI has reviewed the existing framework for addressing technical glitches in stockbrokers’ electronic trading systems. Following public consultation and stakeholder feedback, SEBI has introduced a revised framework that seeks to make compliance more proportionate, practical, and cost-effective, without compromising market integrity.

Key Provisions / Highlights

The revised technical glitch framework introduces several material changes:

• Streamlined eligibility criteria
  The framework will now apply only to stockbrokers having more than 10,000 registered clients. Smaller brokers with limited scale and lower technology dependence have been excluded, resulting in nearly 60% of brokers moving out of the framework and experiencing reduced compliance requirements.
• Exemptions from applicability
  Certain categories of glitches have been excluded from the framework, including:
  • Glitches occurring outside the broker’s trading architecture
  • Glitches that do not directly impact trading functionality
  • Glitches with negligible impact
    These exemptions provide immunity to brokers for events beyond their control that do not affect service delivery.
• Simplified reporting requirements
  Reporting timelines for technical glitches have been extended from one hour to two hours. The revised framework also factors in trading holidays and replaces multi-exchange reporting with a single Common Reporting Platform.
• Rationalised technology requirements
  Technology compliance norms, such as capacity planning and disaster recovery drills, have been rationalised based on the size of the broker and its level of technology dependence, reducing unnecessary cost burdens.
• Revised disincentive structure
  The financial disincentive framework has been rationalised by considering exemptions, nature of glitches (major or minor), and frequency of occurrence. Detailed disincentive structures will be issued by stock exchanges.

Practical Implications for Stockbrokers

• Smaller brokers benefit from significant relief through exclusion from the framework.
• Larger brokers gain flexibility through clearer exemptions and simplified reporting processes.
• Compliance costs related to technology infrastructure and reporting are expected to reduce.
• Operational focus can shift from procedural reporting to actual system resilience and service continuity.

Compliance, Risk, and Governance Impact

• The revised framework adopts a risk-based and proportionate regulatory approach.
• Brokers remain accountable for material glitches affecting trading continuity, while being protected from events beyond their control.
• Streamlined reporting and rationalised penalties improve regulatory clarity and predictability.
• Governance frameworks will need to be updated to align with revised eligibility thresholds and reporting mechanisms.

Key Takeaways

• SEBI’s revised technical glitch framework materially reduces compliance burden, especially for smaller brokers.
• Larger brokers should reassess their technology, reporting, and governance frameworks considering revised norms.
• The changes reflect a shift towards outcome-oriented regulation while maintaining market stability and investor confidence.