SEBI issues guidelines to address technical glitches, cyber security threats at stock brokers

Market regulator Security and Exchange Board of India (Sebi) has issued guidelines for stock exchanges and brokers to address malfunctions. The development comes amid rising concerns of technical glitches and cyber security threats.

The guidelines are in line with investor interest as technology-related interruptions and glitches (technical glitches) can impact the investors’ opportunity to trade.

The guidelines stated that the stock exchanges need to inform about the glitch within an hour of the occurrence.

“Stock brokers shall inform about the technical glitch to the stock exchanges immediately but not later than 1 hour from the time of occurrence of the glitch,” the SEBI circular read.

It said that the stock brokers will have to submit a Preliminary Incident Report to the Exchange within T+1 day of the incident.

“Stock brokers shall submit a Preliminary Incident Report to the Exchange within T+1 day of the incident (T being the date of the incident). The report shall include the date and time of the incident, the details of the incident, the effect of the incident, and the immediate action taken to rectify the problem.”

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The circular said that stock exchanges shall maintain a dedicated cell for monitoring the key parameters and the technical glitches occurring in stock brokers’ trading systems. The cell also shall intimate the specified stock broker concerned immediately about the breach of the key parameters monitored.

SEBI has also told the stock brokers to conduct drills for live trading, “Specified stock brokers shall conduct DR drills / live trading from DR site. DR drills / live trading shall include running all operations from DRS for at least 1 full trading day. Stock exchanges in consultation with specified stock brokers shall decide the frequency of DR drill / live trading from DR site.”

SEBI has instructed stock exchanges to disseminate on their websites the instances of technical glitches occurring in the trading system of stock brokers along with Root Cause Analysis (RCA) on such glitches.

Brokers should also have all ISO certifications specified by the stock exchanges from time to time in the area of IT and IT-enabled infrastructure/processes of the stock brokers.

SEBI has also asked brokers to do their software testing in automated environments and has asked stock exchanges to issue detailed guidelines with regard to testing of software, testing in automated environments, traceability matrix, change management process, and periodic updation of assets, etc.

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