Sebi moves to fix 'glitches' in online trading platform rules

Synopsis

SEBI is proposing changes to the framework for technical glitches in stockbrokers' online trading systems, excluding issues outside trading hours or beyond their control. The new rules will apply to brokers with over 10,000 clients, exempting 457 smaller firms. Financial penalties will be waived for glitches with minor operational impacts, and exchanges will disclose glitch information.

Mumbai: The Securities and Exchange Board of India (Sebi) has proposed changes to the framework covering technical glitches in the online trading systems of stockbrokers.

It suggested modifying the definition of technical glitch to exclude problems occurring after trading hours and which are not under the control of stockbrokers.

Any malfunction in the electronic system of a stockbroker is now termed technical glitch.

The regulator said the proposed framework would be made applicable to stockbrokers providing internet-based trading platforms and having more than 10,000 clients as on March 31 of the previous financial year. As a result, as many as 457 small stockbrokers would move out of this framework, Sebi said in a discussion paper on Monday.

"This will result in ease of compliance for such stockbrokers considering their low clientele base and relatively less of technology dominance in their trading services," it said.

Sebi said a financial disincentive structure would not be applicable for the technical glitches which do not affect the broker's ability to provide seamless services to their clients; for instance, a technical glitch that has a minor impact on the operations of the stockbrokers.

It suggested that stock exchanges rationalise the current structure of the financial disincentives and disseminate information on their websites about instances of technical glitches occuring in the trading system of stockbrokers.

Growth in the number of investors creates an additional burden on the trading system of the stockbroker and, hence, adequate capacity planning is a prerequisite for stockbrokers to provide continuity of services to their clients, Sebi said.

Brokers should do capacity planning for the entire trading infrastructure and monitor peak load in their trading applications, servers and network architecture, it said.

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