If you’ve been trading for a while, you’ve probably faced it too; one fine day, the app you use just refuses to work no matter what. You either can’t log in, orders don't go through, charts freeze, or data-feeds get stuck. When your money’s at risk, and you’re stuck refreshing like a madman, you feel helpless and frustrated. In light of the recent incident, I thought I'll publish a post highlighting the regulator's approach to this.
SEBI has come out with a new consultation paper last month (September 2025) reviewing how brokers should deal with these glitches . It may sound like boring regulator stuff, but trust me, this is important for traders. Because at the end of the day, all large broker's systems have malfunctioned during market hours, at one point or another, when it was least expected.
Back in November 2022, SEBI had already set a framework for handling glitches . Stock exchanges even came out with detailed rules in December 2022. But then, traders, brokers, and industry forums gave feedback saying:
The framework was too harsh for smaller brokers.
Reporting requirements were messy and unrealistic.
There was no clarity on what exactly counts as a “technical glitch.”
The fines and penalties weren’t practical.
So SEBI is now reworking it. Think of it like a “v2” policy update.
Who Will This Apply To?
This is interesting. SEBI doesn’t want to burden smaller brokers with all these rules. So the new framework will only apply to brokers with more than 10,000 clients, which is mostly brokers you have heard about or used before. That means around 457 small brokers will be excluded from these heavy compliance requirements. The rules will mostly hit the mid-sized and big brokers only.
What Exactly is a “Technical Glitch” as per regulatory definition?
This is where SEBI has finally tried to define things clearly. According to the paper, a technical glitch means:
Any malfunction in the broker’s trading system (hardware, software, networks, bandwidth, servers, etc.)
It has to happen during market hours.
It should affect critical trading functions: logging in, placing/modifying/cancelling orders, execution, confirmations, viewing margin, funds, collateral, etc.
And the problem has to last at least 5 minutes continuously .
So basically, if your app freezes for 30 seconds, that doesn’t count. But if you can’t log in for 10 minutes while Nifty is tanking, it is counted as a glitch.
What Does NOT Count as a Glitch?
If AWS/Azure/Google cloud crashes globally.
If NSE or BSE themselves face a problem.
KYC issues when opening new accounts.
Back-office issues (like reports not loading).
Bank or payment gateway failures during fund transfers.
Charting tool bugs (like indicators not showing).
In short, if it’s outside the broker’s control or doesn’t impact live trading, it won’t count.
Reporting Rules What Brokers Must Do when it happens
The broker must inform both the exchange and all clients (via website, app popup, SMS, or email) within 2 hours.
By next trading day (T+1) they must file a preliminary report with the exchange.
Within 14 days they must submit a full RCA “Root Cause Analysis Report.”
All reports must be filed on a common SEBI portal called Samuhik Prativedan Manch.
And exchanges will publish these glitch reports on their websites. That means, as traders, we’ll be able to see which brokers had issues and how often. This transparency is a big deal. Imagine being able to compare brokers not just on brokerage charges but also on how reliable their tech is. Today, we're probably the only broker to publish a near real-time live status dashboard so that traders can get immediate insights if anything isn't functioning. I'd encourage you to read about this in this detailed post. It'll be awesome if everyone is forced to become accountable like this as well.
Penalties & Disincentives
SEBI had earlier introduced fines when brokers faced glitches. But now they are relaxing it a bit.
If one platform (say mobile app) goes down but the web app works fine, no penalties will be imposed.
If the issue is minor and doesn’t impact most clients, there won't be any penalties .
But still, if a major glitch happens and clients lose access, the broker will face penalties. Exchanges will fine them, and they’ll be under pressure to fix their systems faster.
Capacity Planning is a Must
One big reason glitches happen is simply load, especially for the largest brokers. Too many users logging in, placing trades, charting, scanning F&O chains servers can’t handle it. Additionally considering that most platforms are build by vendors, the chain link can break. This is why we try to build as much of what we offer, in-house and will continue to do that as much as possible in the future too as it gives us more control over user experience.
SEBI now wants brokers to:
Do better capacity planning for servers, networks, and apps.
Monitor peak loads.
Keep enough buffer capacity for surges,, which needs special attention.
This is critical. If any broker is adding lakhs of new accounts every quarter, they need infra that scales. Otherwise, the next “glitch day” is just waiting to happen.
W.r.t Software Testing & Updates
Brokers push an app update, and boom, half the traders are locked out (Exaggerating 🙂 ). An app update is the most critical thing for any entity in our business. SEBI now wants strict rules for:
Rigorous testing of updates before rollout.
Proper change management processes.
Exchanges issuing guidelines on how brokers must manage this .
The thing is “new version bugs” have caused as much pain as server crashes and institutionalizing a framework can help reduce glitches.
Monitoring through LAMA
SEBI already has a system called LAMA (Logging and Monitoring Mechanism) that tracks broker systems through APIs. This intiative could perhaps help establish a centralized dashboard of uptime status across brokerage platforms. Exchanges will continue to monitor brokers in real time. They’ll set parameters, collect logs, and preserve them for audits. Think of this as SEBI having CCTV access to broker systems, so they can’t hide issues, like many do today.
BCP & DR – Backup Systems
Business Continuity Planning (BCP) and Disaster Recovery (DR) sites have been discussed and are theoretically in place for a long time. However, when there is an outage for example, during market hours, moving the entire setup to DR site is a very challenging task, which is yet to be perfected. Even exchanges haven't been able to move from main site to DR intraday! The efforts being taken in this direction are positive and with time, BCP and DR hopefully will be less theory and more practice. We take these things very seriously and have been operating out of both, main site in Mumbai and DR site in Chennai, to ensure redundancy. However, there is scope for more improvement in this area as the ecosystem evolves.
Key points to note:
Small brokers don’t need DR sites (saves cost for them, so yeah lesser said the better).
Large brokers must set up DR sites in a different seismic zone (Mumbai & Chennai are in different zones).
Regular drills will be required (We have done this a couple of times already).
Recovery Time Objective (RTO) and Recovery Point Objective (RPO) will be defined clearly.
Here's Why this Matters to You
Transparency – You’ll know which brokers face glitches most often. Exchanges will publish the data.
Accountability – Brokers can’t hide behind vague excuses like “network issue” anymore. They’ll need root-cause reports.
Reliability – Bigger brokers will be forced to invest more in infra. That means fewer “app not working” days.
Better Communication – If your broker’s system goes down, you’ll get updates via SMS/email instead of sitting clueless.
Competition – If one broker keeps failing, traders will migrate. This forces brokers to up their game.
Closing Thoughts
At the end of the day, trading is stressful enough without your broker’s app acting up. SEBI’s new framework is basically a nudge (or push) to brokers: “Boss, invest in your tech. Stop cutting corners. Traders deserve stable platforms.”
But traders also need to be smart:
Don’t keep all eggs in one basket. Have 2 broker accounts, one as a backup.
Choose a broker who has the ability to deal with all this efficiently.
Beware of free-type trading apps. "If you don't pay for the product, you are the product."
This is still a draft, and SEBI has invited public comments till October 12, 2025 . If you’ve got strong views, you can actually submit feedback. Because end of the day, these policies are meant to protect traders. I have attached the SEBI white paper for your reference if you want to check it out.