Description

SEBI revises the technical glitch framework for stock brokers based on stakeholder feedback, streamlining eligibility criteria, exemptions, reporting requirements, and rationalized disincentive structure.

Summary

SEBI has issued a comprehensive review and modification of the technical glitch framework for stock brokers’ electronic trading systems, originally introduced in November 2022. The revised framework, effective January 09, 2026, addresses stakeholder concerns by streamlining compliance requirements, introducing exemptions for smaller brokers and certain types of glitches, extending reporting timelines, and rationalizing financial disincentives based on glitch severity and frequency.

Key Points

  • Technical glitch framework originally issued via SEBI Circular No. SEBI/HO/MIRSD/TPD-1/P/CIR/2022/160 dated November 25, 2022 has been modified
  • Modifications based on stakeholder representations, industry feedback, and analysis of technical glitch data
  • Public consultation paper was issued and feedback analyzed before finalizing changes
  • Eligibility criteria streamlined to exclude smaller stock brokers from framework coverage
  • Reporting time extended from one hour to two hours
  • Single reporting platform (Common Reporting Platform) instead of reporting to all exchanges
  • Technical glitch defined as malfunction in broker’s electronic system lasting five minutes or more during trading session
  • Exemptions introduced for glitches outside broker’s trading architecture and those with negligible impact

Regulatory Changes

Definition of Technical Glitch

Technical glitch means any malfunction in the electronic system of stock broker, including hardware, software, networks/bandwidth, processes or products/services, directly or indirectly related to trading and risk management, occurring during trading session for a contiguous period of five minutes or more. This includes malfunctions affecting:

  • Log-in functionality
  • Order placement, modification, cancellation, execution, confirmation, status
  • Allocation and viewing of margin/collateral/funds

Exemptions from Technical Glitch Framework

The following technical issues shall NOT be considered as technical glitches and need not be reported:

  • Technical glitches due to global issues such as malfunction or technical disruption at cloud service provider level
  • Issues in systems outside the broker’s trading architecture
  • Glitches that don’t directly affect trading functionality
  • Technical issues with negligible impact

Five Broad Principles of Modification

  1. Ease of compliance: Eligibility criteria streamlined to exclude smaller size stock brokers
  2. Exemptions from applicability: Glitches outside broker’s trading architecture, those not directly affecting trading functionality, and those with negligible impact are exempted
  3. Simplified reporting requirement: Extension from one hour to two hours for reporting, consideration of trading holidays, single reporting platform (Common Reporting Platform)
  4. Rationalized technology requirements: Requirements for capacity planning, software testing and DR drill rationalized based on broker size and technology dependency
  5. Rationalized disincentive structure: Financial disincentives rationalized considering exemptions, type of glitches (major or minor), and frequency of occurrences

Compliance Requirements

  • Stock brokers must report technical glitches within two hours (extended from one hour)
  • Reporting to be done through Common Reporting Platform instead of individual exchange reporting
  • Trading holidays to be considered while submitting reports
  • Technical glitch framework applies only to eligible stock brokers based on revised eligibility criteria
  • Brokers must distinguish between major and minor glitches for disincentive applicability
  • Capacity planning, software testing and DR drill requirements vary based on broker size and technology dependency

Important Dates

  • January 09, 2026: Circular issued with revised technical glitch framework
  • November 25, 2022: Original technical glitch framework issued (SEBI Circular No. SEBI/HO/MIRSD/TPD-1/P/CIR/2022/160)
  • December 16, 2022: Stock Exchanges issued detailed guidelines on original framework

Impact Assessment

Positive Impacts

  • Reduced compliance burden: Smaller stock brokers exempted from framework, reducing operational overhead
  • Operational flexibility: Extended reporting time (two hours vs one hour) allows better incident assessment
  • Streamlined reporting: Single Common Reporting Platform reduces administrative burden
  • Cost effectiveness: Rationalized technology requirements based on broker size reduce unnecessary infrastructure costs
  • Fair penalty structure: Disincentives rationalized based on glitch type and frequency

Operational Impacts

  • Stock brokers need to update internal procedures for technical glitch identification and reporting
  • Brokers must assess eligibility under revised criteria
  • Systems and processes need alignment with new exemption categories
  • Integration with Common Reporting Platform required
  • Review and update of DR drill, capacity planning and software testing procedures based on new rationalized requirements

Market Impact

  • Improved operational resilience through focused compliance on critical glitches
  • Better resource allocation as smaller brokers can focus on core trading operations
  • Enhanced market stability through appropriate monitoring of significant technical disruptions
  • Balanced approach between investor protection and operational practicality

Impact Justification

Significant modification to technical glitch framework affecting all stock brokers, with changes to reporting requirements, exemptions, and disincentive structure that will impact operational compliance.