SEBI's Framework for Technical Glitches in Stock Brokers' Electronic Trading Systems (“SEBI Framework”)

In November 2022, SEBI introduced a framework to address technical issues in the electronic trading platforms used by stock brokers, which was further supported by stock exchanges issuing detailed directions in December 2022 After receiving feedback from stakeholders and identifying implementation challenges, SEBI released a consultation paper in in September 2025, proposing updates to the framework. These updates aim to enhance system reliability, strengthen investor protection, and simplify compliance. The proposed changes include clearer definitions of technical glitches, exemptions for small-sized stock brokers, streamlined reporting, revised penalty structures, and improved system oversight and capacity planning in line with evolving technology and market conditions. Some of the key highlights of SEBI Framework are:

What is ‘Technical Glitch’ are per SEBI Framework

The SEBI Framework defines a “technical glitch” as any continuous malfunction lasting five minutes or more during trading hours that affects the electronic systems of stock brokers. These systems include hardware, software, network bandwidth, and operational processes critical to the trading and risk management functions. Such disruptions may impact activities like placing or changing orders, executing trades, confirming transactions, managing margins and collateral, and overseeing risk.

However, certain types of issues are explicitly excluded from being classified as technical glitches. These exemptions cover problems caused by external cloud service providers, disruptions reported by Market Infrastructure Institutions (MII), technical glitches during new trading account processes such as Know Your Customer (KYC), back-office issues that do not influence trade settlements, failures in payment gateways outside control of stock brokers (such as those occurring at banks or third-party payment processors), and malfunctions in supplementary tools like charts or back-office reporting systems. Additionally, glitches occurring solely in one trading channel, either mobile or web, while the other operates normally, as well as minor glitches with little effect on a stock broker’s overall operation, are also outside the scope of this definition. These exceptions help focus regulatory actions on significant problems that materially impact market participants and trading activities.

Scope and Applicability

The SEBI Framework covers stock brokers who provide internet-based trading (IBT) or wireless trading platforms (STWT) and have a client base exceeding 10,000 as of March 31 of the preceding financial year. Stock brokers with fewer clients or those using limited technology in their operations are exempt, ensuring the requirements are proportionate to their scale of business.

Reporting and Transparency Mechanisms

Stock brokers are required to inform the relevant stock exchanges and their clients about any technical glitches within two hours of the incident. The stock exchanges will then make details of such technical issues available on their websites for public knowledge.

Additionally, stock brokers must submit a Preliminary Incident Report outlining the glitch by the next trading day following its occurrence. Within 14 calendar days, they are also obligated to provide a comprehensive Root Cause Analysis (RCA) Report, which should follow formats prescribed by the stock exchanges. These reports must be submitted through a centralized platform called the ‘Samuhik Prativedan Manch’.

Stock exchanges will review all reported glitches in detail and will also carry out independent monitoring of trading systems to identify any further incidents, taking necessary actions to maintain compliance and market integrity.

Capacity Planning and System Robustness

Recognizing the growing pressure on trading platforms, SEBI requires stock brokers to undertake proactive capacity planning. This involves evaluating and enhancing their server resources, network infrastructure, and application performance to efficiently manage peak usage periods and minimize operational disruptions. Stock brokers are also expected to continuously monitor the maximum load on their critical systems, including servers and networks.

To support these efforts, stock exchanges will provide detailed guidelines on managing capacity and monitoring peak loads. Additionally, they have implemented an API-based Logging and Monitoring System called LAMA. The exchanges will establish provisions regarding the use of LAMA, specifying key monitoring parameters and requirements for maintaining logs, thereby ensuring effective oversight of stock broker’s systems.

Software Testing and Change Management

The SEBI Framework places strong emphasis on rigorous controls over software updates and modifications. Stock brokers are required to thoroughly test all software changes before deploying them to production environments, as insufficient testing can result in technical failures and disruptions. To ensure consistency and reliability, stock exchanges will provide detailed guidelines covering areas such as software testing procedures, the use of traceability matrices, change management protocols, and the periodic updating of technological assets.

Business Continuity Planning (BCP) and Disaster Recovery Site (DRS)

Stock Exchanges shall review and revise guidelines with respect to BCP and DRS guidelines to ensure:

• Exemption of small-sized stock brokers from requirements pertaining to BCP and DRS.
• DR sites are located in different seismic zones from primary sites.
• Defined and periodically reviewed frequency of DR drills and live trading.
• Clear definition of Recovery Time Objective (RTO), Recovery Point Objective (RPO), and the term “Disaster”. and
• Inclusion of BCP–DR coverage in System Audit and ISO certification.

Public Disclosure and Regulatory Oversight

To enhance market transparency, stock exchanges will publish detailed data on reported technical glitches, enabling investors and stakeholders to make informed decisions. Exchanges will develop systems to support the implementation of the SEBI Framework and issue further operational guidelines to stock brokers.

Effective date

The SEBI Framework will come into effect on November 1, 2025.