SEBI Seeks Feedback on Framework for Technical Glitches

Consultation Papers Dated 22.09.2025

1. Introduction

The Securities and Exchange Board of India (SEBI) has issued a consultation paper aimed at reviewing the existing framework for handling technical glitches in stock brokers’ electronic trading systems. With the increasing reliance on technology in securities markets, SEBI’s initiative seeks to ensure a balance between regulatory oversight and operational practicality for brokers. The proposed changes are designed to provide greater clarity, reduce unnecessary compliance burdens, and strengthen overall investor confidence.

2. Redefinition of Technical Glitch

One of the key proposals in the consultation paper is the modification of the definition of a “technical glitch.” SEBI has suggested that glitches occurring after trading hours and those beyond the control of stock brokers should be excluded from this definition. This change ensures that brokers are not unfairly penalized for disruptions outside their operational control, thereby making the framework more equitable and focused on material issues that impact active trading sessions.

3. Applicability of the Framework

SEBI has also proposed refining the scope of the framework to target larger brokers. Specifically, the revised framework will apply only to stock brokers offering Internet-Based Trading (IBT) or Smart Trading Workstation Terminals (STWT) platforms and having more than 10,000 registered clients as of March 31 of the previous financial year. This change would exempt around 457 smaller brokers from the compliance requirements, thereby reducing their regulatory burden while ensuring that larger brokers, who cater to the majority of investors, remain accountable.

4. Simplification of Reporting

Another important reform under consideration is the rationalization of reporting requirements related to technical glitches. SEBI acknowledges that brokers need reasonable time to compile accurate reports, especially in the context of trading holidays and system dependencies. The consultation paper proposes easing these timelines and further recommends that all reporting be centralized through a Common Reporting Platform, thereby eliminating the need for multiple submissions to different stock exchanges. This is expected to streamline processes and improve efficiency for both brokers and regulators.

5. Conclusion

Through this consultation paper, SEBI demonstrates its intent to refine regulatory mechanisms while reducing unnecessary compliance obligations for smaller brokers. By redefining technical glitches, narrowing the scope of applicability, and simplifying reporting, SEBI aims to create a more practical and fair framework. Stakeholders, including brokers and investors, have been invited to submit their comments and suggestions by October 12, 2025, ensuring that the final framework reflects industry perspectives and promotes a more resilient trading ecosystem.

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