Standard Operating Procedure for handling of technical glitches by market infrastructure institutions and payment of financial disincentives thereof- (Securities and Exchange Board of India) (05 Jul 2021)

MANU/SSMD/0024/2021

Capital Market

1. MIIs (i.e. Stock Exchanges, Clearing Corporations and Depositories) are systemically important institutions as they, inter-alia, provide infrastructure necessary for the smooth and uninterrupted functioning of the securities market.

2. With increasing dependence on technology, as the operations and functioning of MIIs are fully automated right from order entry to order matching to trade confirmation leading up to clearing and settlement of trades, the instances of technical glitches at MIIs, leading to business disruption/unavailability of services provided by MIIs, have been occurring, despite various mechanisms stipulated by SEBI such as Business Continuity Planning, Disaster Recovery policies, System Audit etc.

3. The general practice in the computing/technology industry to deal with business disruption/unavailability of services, is to work with specified downtime and for downtimes beyond such specified time, a pre-defined penalty structure is included in Service Level Agreement.

4. Considering the criticality of smooth functioning of systems of MIIs (as any disruption adversely impacts all classes of investors/market participants as well as the credibility of the securities market), specifying a pre-defined threshold for downtime of systems of MIIs becomes desirable. For any downtime or unavailability of services, beyond such pre-defined time, there is a need to ensure that "Financial Disincentive" is paid by the MIIs as well as Managing Director (being the executive head in-charge of all the day to day operations) and Chief Technology Officer (being the executive head in-charge of technology) of the MII. This will encourage MIIs to constantly monitor the performance and efficiency of their systems and upgrade/enhance their systems etc. to avoid any possibility of technical glitches/disruption/disaster and restart their operations expeditiously in the event of glitch/disruption/disaster.

5. Accordingly, after extensive discussion with various stakeholders, it has been decided that, MIIs shall:

a. Follow the Standard Operating Procedure (SOP) for handling technical glitches as detailed at Annexure-I of this Circular, and,

b. Comply with the "Financial Disincentive" structure as detailed at Annexure-II of this Circular.

6. The aforesaid "Financial Disincentives", when triggered automatically under predefined conditions, as detailed in Annexure-II of this Circular, shall be credited to the Investor Protection Fund/Core Settlement Guarantee Fund maintained by the MII.

7. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Tags : SOP HANDLING TECHNICAL GLITCHES