SEBI excludes small brokers from technical glitch framework
Context
Securities and Exchange Board of India (SEBI) decided that:
Stock brokers with less than 10,000 registered clients do not need to follow the technical glitch framework.
Because of this:
About 60% of brokers are excluded from these rules.
Why did SEBI do this?
Small brokers have:
Limited trading volume
Lower systemic risk
Applying the same strict rules to all brokers was seen as unnecessary compliance burden.
What is the “Technical Glitch Framework”?
It is a rulebook made by SEBI to deal with technology failures in stock trading.
In simple words:
When a broker’s trading system fails (due to software, hardware, network issues):
It can stop investors from buying or selling shares
This can cause losses and market panic
So SEBI created a framework to:
Identify
Report
Fix
Compensate (if needed)
for such trading disruptions.
What kind of glitches are covered?
Earlier, many glitches were covered.
Now, SEBI has exempted:
Glitches outside the broker’s trading system
Example: Internet failure at client’s home
Glitches that do not affect actual trading
Example: Delay in viewing account balance
Glitches with negligible impact
Example: Very short system slowdown
Other important changes
Reporting time extended
Earlier: Broker had to report a glitch within 1 hour
Now: Reporting time extended to 2 hours
Common reporting platform
Brokers who fall under the framework can:
Report glitches on a single common platform
This improves coordination and monitoring.
Prelims Practice MCQs
Q. With reference to the recent decision of SEBI regarding the technical glitch framework, consider the following statements:
Stock brokers with less than 10,000 registered clients are exempted from the framework.
Nearly 60% of stock brokers are excluded from compliance due to this decision.
The exemption applies only to brokers operating in commodity derivatives.
Which of the statements given above is/are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3
Answer: (a)
Explanation:
Statements 1 and 2 are correct.
Statement 3 is incorrect: the exemption is based on number of clients, not segment.
Q. The “technical glitch framework”, often seen in news, is issued by:
(a) Reserve Bank of India
(b) Ministry of Finance
(c) Securities and Exchange Board of India
(d) Stock exchanges jointly
Answer: (c)