SEBI Proposes Revamp of Broker Glitch Rules; Narrower Scope, Clearer Definitions

Moneylife Digital Team 24 September 2025

Investor Interest

Market regulator Securities and Exchange Board of India (SEBI) has floated a consultation paper to overhaul the existing framework for addressing ‘technical glitches’ in stockbrokers’ electronic trading systems. The revised framework, which is slated to take effect from 1 November 2025, proposes narrower applicability, clearer definitions and a rationalised penalty structure.

The move comes after repeated trading disruptions in recent years. Zerodha, India’s largest retail brokerage, recently suffered a glitch that prevented many users from viewing updated stock prices and accessing their accounts, with several also reporting issues in order modification. In July last year, brokerages, including Nuvama, Edelweiss, Motilal Oswal, IIFL Securities, 5Paisa and Angel Broking faced disruptions to online services amid a global IT outage triggered by an update to a product offered by a cybersecurity firm, says a report from Reuters.

Over the past few years, investor clients of several stockbrokers have frequently flagged problems ranging from login failures and missing price updates to order execution delays and mismatches in statements, especially during volatile or high-volume sessions.

The SEBI consultation paper, released on 22 September 2025, follows the market regulator’s earlier framework introduced in November 2022 and subsequent guidelines from stock exchanges in December that year. According to the regulator, multiple industry representations and data analysis highlighted the need to streamline compliance, remove ambiguities and ensure proportional enforcement in cases of technology breakdowns.

A key proposal is to redefine 'technical glitch' by excluding issues that occur outside trading hours or those beyond brokers’ control. Global service disruptions, payment gateway failures, new account processing delays, back-office errors and failures in decision-support tools such as charts or reports will no longer be classified as reportable glitches.

SEBI has also clarified that the financial disincentive mechanism will not apply to minor incidents or where at least one trading mode—mobile or web—remains functional.

The regulator has sought to limit the framework’s scope to stockbrokers offering internet-based trading (IBT) or securities trading using wireless technology (STWT) platforms with more than 10,000 registered clients as of 31st March of the preceding financial year. This change will ease compliance for about 457 smaller brokers who, collectively, service fewer clients and rely less on technology-heavy platforms.

Reporting requirements are also being streamlined. Instead of multiple reporting channels, brokers will now file incident details through a common reporting platform, with the timeline extended from one hour to two hours after detection. Stockbrokers must also update clients through their websites and communication tools such as SMS, emails, or app pop-ups. Exchanges will, in turn, disseminate glitch-related information publicly on their websites.

The proposals further place greater responsibility on stock exchanges to frame detailed operational guidelines covering capacity planning, software testing and change management, monitoring mechanisms, business continuity planning and disaster recovery sites. Forensic analysis of glitches, including root cause reports within 14 days, will be mandatory.

SEBI has invited public feedback on the proposals until 12 October 2025 through its online comments portal. The regulator said the measures are intended to protect investors’ interests while ensuring that compliance obligations remain proportionate to the size and technological profile of stockbrokers.

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