SEBI has established a comprehensive framework to address technical glitches in electronic trading systems. While primarily applicable to stock brokers and Market Infrastructure Institutions (MIIs), the framework provides important insights for all technology-dependent entities. This article provides a comprehensive technical analysis of the framework.
Regulatory Basis
Primary Circular: SEBI/HO/MIRSD/TPD-1/P/CIR/2022/160
SEBI issued the circular on "Framework to address the technical glitches in Stock Brokers' Electronic Trading Systems" on November 25, 2022.
Review and Updates
SEBI has issued consultation papers and draft circulars on reviewing the technical glitch framework. A corrigendum expanded the definition of what constitutes a technical glitch.
Definition of Technical Glitch
What is a Technical Glitch?
Technical glitch shall mean any malfunction in the electronic trading systems.
What is NOT a Technical Glitch
Under a draft circular, disruptions caused by the following are not considered technical glitches:
- Global cloud service providers
- Market Infrastructure Institutions (MIIs)
- Delays in KYC processing
- Back-office issues not affecting trading
- Payment gateway failures
- Problems in decision-support tools such as charts or reports
Glitch Reporting
Any glitch incident which falls under the definition of technical glitch will be considered as a glitch irrespective of the number of clients or orders affected.
Reporting Framework
iSPOT Portal
SEBI has developed a web-based portal, i.e., Integrated SEBI Portal for Technical Glitches (iSPOT), for submission of preliminary and final RCA reports of technical glitches by the MIIs.
Reporting Process
- Glitch Discovery: Identify the technical glitch.
- Preliminary Report: Submit preliminary report through iSPOT.
- Root Cause Analysis: Conduct RCA.
- Final Report: Submit final RCA report through iSPOT.
- Remediation: Implement corrective measures.
Types of Glitches
1. Technology Disruption Due to MII
Glitch reported by MII to SEBI.
2. Technological Issues in KYC
Technological issues in processing of new trading account (KYC process).
Compliance Requirements
1. Glitch Identification
Identify technical glitches promptly.
2. Reporting
Report glitches through the prescribed mechanism.
3. RCA
Conduct root cause analysis.
4. Remediation
Implement corrective measures.
5. Record Keeping
Maintain records of glitches and remediation.
Applicability to RAs
| RA Type | Technical Glitch Framework Applicability |
|---|---|
| RA only | Limited applicability |
| RA + Stock Broker | Full applicability |
| RA + other intermediary | Applicable as per intermediary category |
Common Compliance Gaps
1. Not Identifying Glitches
Some entities do not identify technical glitches promptly.
Solution: Implement monitoring systems.
2. Delayed Reporting
Some entities delay reporting glitches.
Solution: Report promptly.
3. No RCA
Some entities do not conduct RCA.
Solution: Conduct thorough RCA.
4. No Remediation
Some entities do not implement corrective measures.
Solution: Remediate promptly.
Conclusion and How Anuj Desai & Associates Can Help
The technical glitch framework ensures prompt identification and resolution of technical issues.
Anuj Desai & Associates offers specialized services to help entities comply with the technical glitch framework:
- Glitch identification and monitoring
- Reporting assistance
- RCA support
- Remediation planning
- Compliance audit and advisory
Contact us today to ensure your technical glitch practices comply with SEBI requirements. Our team will guide you through the process.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.