India’s market regulator has changed the rules on how stock brokers report technical glitches, easing the burden on smaller firms while keeping scrutiny on problems that actually affect trading or investors. The Securities and Exchange Board of India (SEBI) announced the revised framework on Friday, signalling a shift away from one-size-fits-all regulation.
The move comes after brokers, especially smaller ones, repeatedly complained that the earlier rules were too sweeping and costly, and often blamed them for technology issues beyond their control. Under the new framework, fewer glitches will need to be reported, timelines have been relaxed, and many brokers have been kept outside the ambit of the rules altogether.
Smaller brokers largely exempt under revised norms
One of the most significant changes is the revision of eligibility criteria. Under the new framework, only stock brokers with more than 10,000 registered clients will be covered. This move alone is expected to exclude nearly 60 per cent of brokers from the technical-glitch regime, most of whom operate at a smaller scale with limited reliance on high-frequency trading systems.
SEBI said the decision was taken to align regulatory oversight with actual risk exposure, noting that smaller brokers typically handle lower volumes and simpler operations.
What will no longer count as a reportable glitch?
The regulator has also clarified what qualifies as a technical glitch, explicitly excluding several categories that previously fell under the reporting net. Glitches originating outside a broker’s trading architecture such as outages at global cloud service providers, failures at market infrastructure institutions, or disruptions at banks and payment gateways will no longer attract penalties.
Similarly, issues that do not directly impact trading functionality or have negligible market impact have been taken out of the definition. These include problems in back-office systems, new account processing, decision-support tools like charts or profit-and-loss statements, and other non-trading applications.
SEBI said these exemptions ensure that brokers are not held accountable for failures beyond their control or for minor technical issues that do not affect client trading.
Reporting timelines relaxed, process simplified
Acknowledging industry feedback that identifying and diagnosing glitches within an hour was often impractical, SEBI has extended the reporting window from one hour to two hours. Brokers will now file preliminary incident reports within one trading day of the occurrence, followed by a detailed root-cause analysis within 14 calendar days through the common portal.
Penalties rationalised, focus shifts to material risks
SEBI has also reworked the financial disincentive structure, taking into account the nature of the glitch whether major or minor – its frequency and the newly introduced exemptions. Detailed guidelines on this aspect will be issued by stock exchanges in consultation with SEBI.
SEBI said the changes are intended to strike a balance between operational resilience and ease of doing business, particularly at a time when compliance costs have been cited as a reason for several small brokers surrendering their licences.
Industry welcomes move as long-overdue relief
Market participants have broadly welcomed the changes. Industry executives said the revised framework reflects a more practical understanding of how brokerage technology operates in real-world conditions and reduces the fear of punitive action for minor or external disruptions.
Over the past few years, broking associations had raised concerns that excessive compliance obligations were squeezing margins and discouraging smaller firms from continuing operations.
SEBI first introduced the technical-glitch framework in November 2022, followed by detailed exchange guidelines a month later. The regulator said the latest overhaul follows a comprehensive review of industry feedback and is designed to ensure oversight is focused where it matters most on genuine trading disruptions and investor protection.
