SEBI Lays Down Framework For Technical Glitches At Brokers' End

Stock brokers will have to report technical glitches to exchanges within one hour of its occurrence.

<div class="paragraphs"><p>(Source:&nbsp;<a href=";utm_medium=referral&amp;utm_content=creditCopyText">David Pupaza</a>/<a href=";utm_medium=referral&amp;utm_content=creditCopyText">Unsplash</a>)</p></div>
(Source: David Pupaza/Unsplash)

SEBI has launched a framework to monitor and address technical glitches in stock brokers' electronic trading systems, considering the growing number of such incidents.

The scope of technical glitches under the framework entails malfunction in any electronic product or services for a period of five minutes or more, the Securities and Exchange Board of India said in a circular.

The reason for the glitches can include inadequate Infrastructure, cyberattacks, procedural errors and omissions or process failures.

Stock brokers will have to report technical glitches to exchanges within one hour of its occurrence, and file a preliminary incident report by the next day. They will also have to submit a root cause analysis within 14 days of the incident.

Stock brokers have been asked to do capacity planning for their entire trading infrastructure, where they will have to monitor peak load in their trading applications, servers and network architecture. The installed capacity shall be at least 1.5 times of the observed peak load, the regulator's framework mandates.

SEBI has recommended stock brokers to maintain full redundancy in their trading-related IT applications and services.

The framework requires brokers to create test-driven environments for all types of software developed by them or their vendors. They also have to implement a change management process to avoid any risk from unplanned and unauthorised changes for all their information security assets.

Stock brokers, with a minimum client base specified by stock exchanges, shall mandatorily establish business continuity and disaster recovery set-up to ensure that calamities do not hinder trading.

Exchanges have been instructed to build API-based Logging and Monitoring Mechanism, which will be operated among them and specified stock brokers’ trading systems. This mechanism will monitor key systems and functional parameters to ensure that their trading systems function in a smooth manner.