SEBI Proposes Tweaking Norms In Online Trading Platforms

SEBI Proposes Tweaking Norms In Online Trading Platforms

The rules will apply to brokers with over 10,000 clients

The Securities and Exchange Board of India (SEBI) has proposed changes to the framework in stockbrokers' online trading systems. It would cover technical glitches, excluding problems occurring after trading hours and not under stockbrokers’ control.

The market regulator said that any malfunction in the electronic system of a stockbroker will now be termed ‘technical glitch’. And the proposed framework would apply to stockbrokers providing internet-based trading platforms and having over 10,000 clients as on 31 March 31 of the previous financial year.

Thus, 457 small stockbrokers would move out of this framework.

In its discussion paper, SEBI stated, "This will result in ease of compliance for such stockbrokers considering their low clientele base and relatively less of technology dominance in their trading services.”

However, it clarified that a financial disincentive structure would not apply to the technical glitches, which do not affect the broker's ability to provide seamless services to their clients. For instance, a technical glitch has a minor impact on the operations of the stockbrokers.

SEBI suggested that stock exchanges rationalised the current structure of the financial disincentives and disseminate information on their websites about instances of technical glitches occurring in the trading system of stockbrokers.

It added that investors’ growth created an additional burden on the trading system of the stockbroker. Hence, adequate capacity planning was a prerequisite for stockbrokers to provide continuity of services to their clients.

The regulator added that brokers should do capacity planning for the entire trading infrastructure and monitor peak load in their trading applications, servers and network architecture.