Internet-Based Trading (IBT) has become the primary mode through which investors access India's securities markets. Whether trading through a broker's website, desktop application, or mobile app, every electronic order ultimately passes through systems regulated by SEBI and the Stock Exchanges.
Given the critical role played by trading technology, SEBI has historically required stock brokers to obtain approvals before introducing Internet-Based Trading facilities. However, over time, the approval framework became increasingly procedural, often delaying technological upgrades without significantly enhancing investor protection.
Recognising the need for faster innovation while preserving robust regulatory safeguards, SEBI and the Stock Exchanges simplified the Internet-Based Trading (IBT) approval process in 2024. The revised framework shifts the focus from obtaining prior approvals for routine technology changes to ensuring continuous compliance with prescribed operational, security, and risk management standards.
This article explains how the approval framework evolved, what changed after the 2024 simplification, the timelines applicable to brokers, and the compliance obligations that continue to apply.
What is Internet-Based Trading (IBT)?
Internet-Based Trading (IBT) refers to a facility through which investors place orders electronically using internet-enabled platforms provided by a registered stock broker.
IBT platforms commonly include:
- web-based trading portals;
- desktop trading software;
- mobile trading applications;
- browser-based trading interfaces; and
- other internet-enabled trading systems approved for use by clients.
The orders transmitted through these platforms are routed to the Stock Exchange through the broker's trading infrastructure.
Why Was an Approval Process Required?
Trading platforms directly interact with Exchange infrastructure and process large volumes of financial transactions.
Accordingly, SEBI historically required brokers to demonstrate that their systems were capable of:
- maintaining market integrity;
- protecting client data;
- ensuring system stability;
- preventing unauthorised access;
- maintaining audit trails;
- managing operational risk; and
- complying with Exchange technology standards.
The approval framework was therefore intended to protect both investors and the securities market.
What Changed in 2024?
The 2024 simplification significantly streamlined the implementation process for Internet-Based Trading facilities.
The revised approach focuses less on obtaining separate approvals for every routine technology enhancement and more on ensuring that brokers maintain continuous compliance with prescribed technical, operational, and cybersecurity standards.
Broadly, the revised framework aims to:
- reduce procedural delays;
- simplify implementation of technology upgrades;
- encourage innovation;
- improve operational efficiency;
- maintain investor protection; and
- strengthen accountability through post-implementation compliance rather than excessive pre-approval requirements.
The simplification does not reduce the broker's regulatory responsibilities.
Does Every Technology Change Require Fresh Approval?
Under the simplified framework, routine technology upgrades and operational improvements are generally dealt with in accordance with the applicable Exchange operating procedures rather than requiring an entirely fresh approval process for every modification.
However, brokers must continue to comply with:
- applicable Exchange directions;
- system audit requirements;
- cybersecurity obligations;
- testing requirements;
- reporting obligations; and
- any approval requirements applicable to material system changes.
Accordingly, simplification should not be interpreted as deregulation.
Regulatory Objectives of the Simplified Framework
The revised framework seeks to achieve multiple objectives simultaneously.
These include:
- faster deployment of technology;
- reduced compliance burden;
- improved investor experience;
- stronger cybersecurity governance;
- operational resilience;
- better risk management; and
- efficient regulatory supervision.
Compliance Requirements Continue to Apply
Although the approval process has been simplified, brokers remain responsible for ensuring that every Internet-Based Trading platform complies with applicable regulatory standards.
Key areas include:
System Security
Trading platforms should incorporate appropriate safeguards against unauthorised access, cyber threats, and data breaches.
Risk Management
Pre-trade risk controls, exposure checks, and margin validations should continue to function effectively.
Business Continuity
Adequate disaster recovery and business continuity arrangements should be maintained to minimise service disruption.
Audit Trails
Every trading instruction should be properly recorded, time stamped, and capable of being reconstructed during regulatory inspections.
Client Authentication
Appropriate authentication mechanisms should be implemented before clients are permitted to access trading facilities.
Operational Stability
Technology upgrades should not compromise market integrity or system availability.
Timelines After the 2024 Simplification
One of the principal objectives of the revised framework is to reduce implementation timelines for introducing or upgrading Internet-Based Trading facilities.
Instead of prolonged regulatory approval cycles, brokers are generally expected to complete the applicable Exchange processes, satisfy prescribed technical and operational requirements, and deploy compliant systems within the timelines specified by the relevant Stock Exchange.
The exact timelines depend upon:
- the nature of the implementation;
- whether the change is routine or material;
- applicable Exchange operating procedures; and
- compliance with testing and certification requirements.
Brokers should therefore always refer to the latest Exchange circulars before implementing new technology.
Responsibilities of Stock Brokers
Every broker providing Internet-Based Trading facilities should establish comprehensive governance over its technology infrastructure.
Key responsibilities include:
- maintaining secure trading systems;
- implementing cybersecurity controls;
- monitoring system availability;
- preserving audit logs;
- conducting periodic system testing;
- maintaining incident response procedures;
- complying with Exchange technology requirements; and
- documenting all material system changes.
Technology governance has become an integral part of regulatory compliance.
Role of Stock Exchanges
Stock Exchanges continue to supervise Internet-Based Trading infrastructure by:
- prescribing technical standards;
- issuing operating guidelines;
- conducting inspections;
- reviewing system audits;
- monitoring technology incidents;
- supervising operational resilience; and
- ensuring compliance with applicable regulatory requirements.
Importance of System Audits
Even after the simplification, periodic system audits remain an important regulatory safeguard.
System audits help verify:
- technology governance;
- cybersecurity preparedness;
- access controls;
- change management;
- operational resilience;
- disaster recovery readiness;
- vulnerability management; and
- regulatory compliance.
Audit observations should be addressed promptly.
Common Compliance Mistakes
Regulators frequently observe deficiencies such as:
- inadequate change management documentation;
- weak cybersecurity controls;
- delayed software testing;
- incomplete audit trails;
- poor user access management;
- insufficient disaster recovery planning;
- inadequate vendor oversight; and
- failure to comply with Exchange technology directions.
Such deficiencies may lead to regulatory observations even where prior approvals are no longer required.
Best Compliance Practices
Stock brokers should establish:
- board-approved technology governance policies;
- formal change management procedures;
- periodic vulnerability assessments;
- regular system audits;
- maker-checker approval controls;
- documented software release procedures;
- comprehensive business continuity plans;
- continuous monitoring of technology infrastructure; and
- regular review of SEBI and Stock Exchange circulars.
Strong governance significantly reduces operational and regulatory risk.
Practical Compliance Takeaway
The 2024 simplification of the Internet-Based Trading approval process should be viewed as a move towards compliance through governance rather than compliance through procedural approvals. While brokers can implement technology more efficiently, they remain fully accountable for maintaining secure, stable, and compliant trading systems.
Accordingly, technology governance, cybersecurity, operational resilience, and proper documentation are now more important than ever.
Conclusion
The simplified Internet-Based Trading framework introduced in 2024 reflects SEBI's evolving regulatory philosophy of encouraging innovation while maintaining robust investor protection. By reducing unnecessary approval requirements and placing greater emphasis on continuous compliance, the framework enables brokers to modernise their technology without compromising market integrity.
For stock brokers, success under the revised framework requires disciplined technology governance, effective risk management, comprehensive documentation, periodic system audits, and continuous compliance with Exchange requirements. Well-managed trading infrastructure not only satisfies regulatory expectations but also enhances investor confidence and operational resilience.
How Anuj Desai & Associates Can Help
Anuj Desai & Associates advises Stock Brokers, Clearing Members, Depository Participants, Alternative Investment Funds (AIFs), Portfolio Managers, Investment Advisers, Research Analysts, and other SEBI-regulated intermediaries on technology governance, operational compliance, and securities law.
Our services include:
- SEBI and Stock Exchange compliance advisory.
- Review of Internet-Based Trading (IBT) implementation frameworks.
- Technology governance and regulatory gap assessments.
- Review of cybersecurity, operational risk, and business continuity frameworks.
- Drafting of SOPs, IT governance policies, and compliance manuals.
- Internal audits and inspection readiness assessments.
- Assistance in responding to SEBI and Stock Exchange observations.
- Ongoing compliance support for SEBI-regulated intermediaries.
Whether you are launching a new online trading platform, upgrading an existing Internet-Based Trading system, or preparing for a regulatory inspection, Anuj Desai & Associates provides practical, technically robust, and regulator-focused advisory solutions to help intermediaries maintain compliance while building secure and resilient technology infrastructure.