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Stock brokers should report tech glitch within hour, says SEBI

Mumbai, November 25, 2022

A root-cause analysis of the glitch should be submitted in 14 days

Over the past couple of years as online and mobile trading grew in India, the new-age trading systems of the brokers also suffered multiple glitches causing a loss to clients. However, a clear picture of what really happened never came out, since there were no rules on reporting such incidents. Come April 2023, brokers will have to report any tech glitch to the exchanges within an hour and submit a preliminary report on the incident in 24 hours.

A root-cause analysis of the glitch will also have to be submitted in 14 days, said a new diktat by SEBI on Friday.

Online trading platforms such as Zerodha, Upstox, ICICI Securities, etc made it to the news on several occasions in the past few years when their systems malfunctioned. The word of the technical glitch mainly spread through social media, when those affected by it took to public platforms like Twitter to express their frustration.

But it was often noticed that brokers never gave detailed reasons behind the glitch or any clarity, experts said.

To improve the monitoring mechanism of the IT systems of stock brokers, SEBI has now directed the stock exchanges to create a Logging and Monitoring Mechanism to be operated between the exchange and the stock broker’s trading system.

‘Enhance capacity’
According to SEBI, a technical glitch would mean any malfunction in the systems of the stock broker including its hardware, software, networks, processes or any products or services provided by the stock broker in the electronic form. Brokers will have to undertake capacity planning exercises for their entire trading infrastructure and enhance the same to 1.5 times the peak-load capacity of the stockbroker.

“To ensure the continuity of services at the primary data centre, stock brokers, as may be specified from time to time by stock exchange, shall strive to achieve full redundancy in their IT systems that are related to trading applications and trading-related services. Specified stock brokers shall monitor key systems and functional parameters to ensure that their trading systems function in a smooth manner,” SEBI said.

Financial disincentives
The stock exchanges have also been asked by SEBI to independently monitor key parameters to gauge the health of the trading systems of specified stock brokers. Brokers with a minimum client base across the exchanges, as may be specified by stock exchanges from time to time, shall mandatorily establish business continuity or disaster recovery set-up.

SEBI has also directed exchanges to put in place a structure of financial disincentives applicable to stock brokers for technical glitches occurring in their trading systems and non-compliance with the provisions.

Specified brokers will also have to test their software in automated environments, prepare a traceability matrix between functionalities and unit tests, while developing any software that is used in trading activities. Also, brokers must implement a change management process to avoid any risks due to unplanned and unauthorised changes for all its information security assets.

[The Hindu Business Line]

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