SEBI Consultation Paper on Review of Framework for Technical Glitches in Brokers’ Electronic Trading Systems

On 22nd September 2025, SEBI issued a consultation paper proposing a revised framework to address technical glitches in the electronic trading systems of stock brokers.

Key Highlights of the Proposal:

• Revised Definition of Technical Glitch – Excludes issues beyond brokers’ control (e.g., cloud service provider disruptions, payment gateway failures, back-office issues).

• Applicability – Framework will now apply only to brokers with >10,000 registered clients, easing compliance for smaller brokers (457 are expected to move out of scope).

• Simplified Reporting – A common reporting portal is proposed to avoid duplication. Brokers must notify exchanges and clients within 2 hours of a glitch and submit detailed reports thereafter.

• Financial Disincentives Rationalised – Penalties will not apply for minor glitches or when one trading channel (mobile/web) remains functional.

• Capacity Planning & Software Testing – Brokers must strengthen infrastructure and rigorously test software changes before deployment.

• Monitoring – Exchanges to continue oversight via API-based Logging & Monitoring Mechanism (LAMA).

• Business Continuity & Disaster Recovery (BCP-DRS) – Applicability streamlined, with stronger requirements for large brokers (e.g., seismic zone separation, recovery objectives).

• Effective Date – Proposed framework to come into effect from 1st November 2025.