The Securities and Exchange Board of India (SEBI) has announced significant relaxations to its technical glitch framework for stock brokers, aiming to simplify compliance and enhance ease of doing business. The revisions, announced on January 9, 2025, come after public consultation and extensive feedback from market participants.

The revised framework focuses on reducing regulatory burden for smaller brokers, refining reporting norms, and aligning technology requirements with the scale of operations.

Eligibility Criteria Made More Flexible

SEBI has narrowed the applicability of the technical glitch framework to brokers with more than 10,000 registered clients. This change is designed to exclude smaller intermediaries with limited technology dependence and lower trading volumes.

With this revision, nearly 60% of stock brokers will no longer fall under the framework, substantially decreasing their compliance responsibilities and associated costs.

Exemptions for Certain Types of Glitches

The new rules also introduce clear exemptions for incidents that:

• originate outside a broker’s own trading system
• do not directly affect trading functionality
• have negligible market impact

These exemptions ensure brokers are not penalised for disruptions beyond their control and minor events that do not hinder client service or trading activity.

Simplified and Extended Reporting Timeline

Reporting requirements have been made more practical. The window for reporting a technical glitch has been extended from one hour to two hours, with consideration given to trading holidays.

Additionally, instead of reporting to multiple exchanges, brokers will now submit information through a single Common Reporting Platform, reducing duplication and administrative effort.

Technology Compliance Rationalised

SEBI has recalibrated technology-related obligations based on the size and technological dependence of brokers. The revised norms cover:

• capacity planning
• disaster recovery (DR) drills
• other system preparedness requirements

This risk-based approach ensures smaller brokers are not burdened with the same level of obligations as large, technology-intensive intermediaries.

Revised Disincentive Structure

The penalty framework has also been rationalised. Financial disincentives will now factor in:

• applicable exemptions
• whether the glitch is major or minor
• frequency of occurrence

This ensures penalties are proportionate and fair, rather than uniform across all types of incidents.

Summary

SEBI has revised its technical glitch framework to make compliance easier for stock brokers. The framework will now apply only to brokers with more than 10,000 clients, exempting around 60% of intermediaries. Reporting timelines have been extended, technology requirements rationalised, and penalties streamlined. Certain glitches beyond brokers’ control have also been exempted, aligning regulations with practical market realities.

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