New Delhi: The Securities and Exchange Board of India (Sebi) has proposed significant changes to the technical glitch framework for brokers, aiming to ease compliance while maintaining investor protection. Under the draft circular, disruptions caused by global cloud service providers, market infrastructure institutions (MIIs), delays in KYC processing, back-office issues not affecting trading, payment gateway failures, or problems in decision-support tools such as charts or reports will not be considered technical glitches. Sebi has invited public feedback on the proposal by October 2, 2025, and expects the revised definition to provide greater clarity for the industry.

The 5-minute threshold for defining a technical glitch remains unchanged. According to Sebi, a technical glitch is any malfunction in a broker’s electronic system—including hardware, software, networks, bandwidth, processes, or products—directly or indirectly related to trading and risk management during the trading session. The malfunction, whether in-house or outsourced, must affect functions such as login, order placement, execution, confirmation, margin allocation, or fund viewing for five consecutive minutes or more.

The move comes after brokers highlighted practical difficulties with the existing framework. Sebi first issued a framework in December 2022, followed by a revised circular in March 2025 after feedback from industry participants.

Sebi noted that it received multiple representations from stakeholders, stock exchanges, and industry forums, prompting a review of the current technical glitch rules. Based on feedback and data analysis, the regulator decided to revise the framework for brokers’ systems.

The proposed framework will apply only to brokers offering internet-based or wireless securities trading (IBT/STWT) platforms with over 10,000 clients, effectively exempting around 457 smaller brokers from compliance due to their limited technological exposure. Reporting norms are also being streamlined: brokers must notify exchanges and clients within two hours, submit a preliminary incident report by the next trading day, and file a root-cause analysis within 14 days. All reports will be routed through the Samuhik Prativedan Manch (common reporting platform) to avoid duplication.

Sebi has also proposed rationalising financial disincentives. Minor glitches or those affecting only one mode of trading (mobile or web) while the other remains functional will not attract penalties. Detailed guidelines will be issued by exchanges in consultation with Sebi.

To prevent disruptions, brokers are expected to undertake robust capacity planning and rigorous testing of software changes, while exchanges will continue monitoring systems via the API-based Logging and Monitoring Mechanism (LAMA). Disaster recovery and business continuity norms are also being reviewed.

The proposed changes aim to balance investor protection with operational ease for brokers, ensuring trading platforms remain resilient amid growing investor participation and rising demands on technology infrastructure.