The SEBI circular dated January 09, 2026, introduces a revised framework for handling technical glitches in the electronic trading systems of stock brokers. This update aims to simplify compliance for smaller brokers while ensuring that larger ones maintain robust systems to protect investors.
Explanation for the same is as follow:
• Who these rules apply to: The framework is now focused on larger stock brokers. It only applies to those who provide electronic trading platforms and have more than 10,000 registered clients. Smaller brokers are excluded to reduce their compliance burden
• What counts as a “Technical Glitch”: A glitch is defined as any hardware, software, or network malfunction that stops or slows down trading activities (like logging in or placing orders) for five minutes or more
• What is NOT considered a glitch: To be fair to brokers, certain issues are exempted from these rules, including:
◦ Global internet or cloud service outages.
◦ Issues at the Stock Exchange itself (MIIs).
◦ Problems with bank payment gateways or account opening (KYC) processes.
◦ Errors in non-trading tools like P&L statements or technical charts
• Simplified Reporting: Reporting requirements have been made easier and more centralized:
◦ Immediate notification: Brokers must inform the exchange and their clients within two hours of a glitch (up from one hour).
◦ Follow-up reports: A preliminary report is due by the next trading day (T+1), and a detailed “Root Cause Analysis” is required within 14 working days.
◦ Single Portal: All reports are now submitted through a common portal called ‘Samuhik Prativedan Manch’.
• System Planning and Testing: Brokers must proactively plan for high traffic (capacity planning) and strictly test any software changes before they go live. The intensity of these requirements is now rationalized based on the broker’s size and how much they depend on technology.
• Disaster Recovery (DR): Larger brokers must have a backup “Disaster Recovery” site in a different geographical zone to ensure trading can continue if the main site fails. However, small brokers are exempt from setting up these expensive backup sites.
• Fairer Penalties: The structure for financial penalties (disincentives) has been updated. Penalties will now consider whether a glitch was major or minor, how often it happens, and if the broker had a secondary trading mode (like a web app) still working while the mobile app was down.
This circular became effective on January 09, 2026, and replaces the previous rules from 2022
