In a major regulatory relief for India's brokerage community, the Securities and Exchange Board of India (Sebi) has significantly relaxed the rules governing technical glitches. The revised framework, announced on Friday, 9 January 2026, will exempt a vast majority of small and mid-sized stockbrokers from stringent compliance requirements, aiming to reduce their operational burden.
Key Change: A Higher Client Threshold
The most impactful revision narrows the scope of the entire technical glitch framework. Previously applicable to all brokers uniformly, the rules will now only mandate compliance for stockbrokers with more than 10,000 registered clients. According to Sebi's own estimates, this single change will remove nearly 60% of all brokers from the framework's purview.
This move is designed to protect smaller firms that have limited scale and a lower dependence on complex, high-frequency trading technology. It aligns with the regulator's stated mission of promoting "ease of compliance" and recognizes the disproportionate cost burden such rules placed on smaller players.
Simplified Reporting and Rationalized Penalties
Beyond the exemption threshold, Sebi has introduced several other simplifications. The definition of a reportable technical glitch has been clarified. Issues that originate outside a broker's own systems, do not directly affect trading, or have a negligible impact will no longer need to be reported.
Reporting mechanics have been made more practical. Brokers now have two hours to report a glitch, instead of one, and trading holidays will be considered in timeline calculations. All reporting will be channeled through a single common platform, eliminating the need to file separate reports with multiple stock exchanges.
The penalty structure has also been reworked. Financial disincentives will now consider exemptions, the severity of the glitch (classified as major or minor), and its frequency. Detailed norms on penalties will be issued by the stock exchanges.
Broader Compliance Rationalization
The rationalization extends to other technology-related obligations. Requirements around capacity planning and disaster recovery drills will now be calibrated based on the broker's size and technological reliance. This ensures that compliance measures are proportionate to the risk and scale of the operation.
This regulatory overhaul follows a consultation paper Sebi released in September last year, seeking feedback from market participants. The final circular reflects a pragmatic approach, focusing regulatory oversight on larger, technology-heavy brokers who serve the bulk of the investor base, while freeing up smaller firms from onerous rules.
The changes are expected to immediately reduce compliance costs for a significant segment of the brokerage industry, allowing them to allocate resources more efficiently. For investors, the core oversight on major players remains intact, ensuring market integrity is preserved where it matters most.
