Capital markets regulator Sebi announced an overhaul of its framework for handling technical glitches in stock brokers' electronic trading systems, a move aimed at improving ease of compliance and reducing regulatory burden, particularly for smaller brokers.

In a press release, the market regulator said it had reviewed the existing technical glitch framework following public consultation and feedback from market participants. The revised norms are part of Sebi's broader push to create a more conducive regulatory environment and support ease of doing business for intermediaries in the securities market.

One of the key changes is the streamlining of eligibility criteria for the applicability of the technical glitch framework. Under the revised rules, the framework will now apply only to stock brokers with more than 10,000 registered clients.

Sebi said this change would exclude smaller brokers with limited business scale and lower dependence on technology, resulting in nearly 60% of stock brokers moving out of the framework and seeing a meaningful reduction in compliance requirements.

Sebi has also carved out specific exemptions from the applicability of the technical glitch norms. Glitches that occur outside a broker’s trading architecture, those that do not directly impact trading functionality, and incidents with negligible impact have been exempted from the framework.

According to the regulator, this provides brokers immunity from events beyond their control and from issues that do not affect their ability to offer seamless trading services.

Another major change relates to reporting requirements. Sebi has extended the timeline for reporting technical glitches from one hour to two hours, offering brokers greater operational flexibility.

The revised framework also takes trading holidays into account while submitting reports and replaces the requirement of reporting to multiple exchanges with a single reporting mechanism through a Common Reporting Platform. This is expected to simplify compliance and reduce duplication.

The regulator has further rationalised technology-related compliance requirements by linking them to the size of the broker and the degree of technology dependence. Areas such as capacity planning and disaster recovery drills have been made more proportionate and cost-effective, easing the burden on smaller and mid-sized firms.

In addition, Sebi said the financial disincentive structure for technical glitches has been rationalised. Penalties will now be calibrated based on applicable exemptions, the nature of the glitch -- classified as major or minor -- and the frequency of such incidents. The detailed disincentive framework will be issued by stock exchanges.

The regulator said the revised framework reflects a balanced approach that maintains market integrity while recognising operational realities faced by brokers. By narrowing the scope of applicability, simplifying reporting, and aligning compliance costs with business scale, the regulator aims to ensure that oversight remains effective without being overly burdensome.