Markets watchdog Securities and Exchange Board of India (SEBI) on Friday asked stock exchanges and clearing corporations to put in place a platform to to give investors an opportunity to square off their position or cancel pending orders in case of disruption of trading services provided by trading members.
It said, in recent times, with increasing dependence on technology in the securities market, there is a rise in instances of glitches in trading members’ systems, some of which lead to disruption of trading services and investor complaints.
After extensive consultations, the regulator has decided to introduce the investor risk reduction access (IRRA) platform and time has been given till 1st October next year to make the platform operational.
“A joint platform to provide investor risk reduction access (IRRA) service shall be developed by the exchanges to provide the investors an opportunity to square off/close the open positions and/or cancel pending orders in case of disruption of trading services provided by the trading member,” SEBI said in a circular.
As per the provisions, trading members, on facing technical glitches which lead to disruption of trading services, can request for enablement of the IRRA service. The market regulator asked the stock exchanges to monitor the parameters like connectivity, order flow, social media posts, etc, and suo moto initiate the enablement of the service, if needed, irrespective of any such request by the trading member.
The trading member will continue to be responsible for all the activities on the IRRA with respect to all obligations including settlement and margin requirements, SEBI said.
It further said that the stock exchanges will design a detailed framework for reverse migration from the IRRA system to the trading member’s trading system, as and when the trading system is revived successfully and a request is made in this regard.
The move comes against the backdrop of a rise in instances of glitches in trading members' (TMs) systems. In such cases, investors with open positions are at risk of the non-availability of avenues to close their positions, particularly if markets are volatile.
In a circular on Friday, SEBI said the IRRA service would support multiple segments across multiple exchanges. "TMs, upon facing technical glitches, which lead to disruption of trading services, can request for enablement of the IRRA service as per the procedures specified by the stock exchanges from time to time and IRRA shall be enabled on receipt of such requests," the SEBI circular said. According to the regulator, exchanges should enable the service suo-moto only if there is disruption of the trading services of a TM across all the exchanges, where the TM is a member.
"In case of disruption of trading services of TM with one/some of the exchanges, where the TM is member, TM may request the enablement, in which case trading member shall use the service for all the exchanges," the circular said.
Once IRRA service is authorised, the investors concerned can square off/close the open positions across segments and exchange/s and/or cancel the orders across segments, which are pending at the exchange/s.
Once the TM's system is revived, then reverse migration from the IRRA system will be done.
"Upon revival of the TM's trading system, TM shall update their systems taking data from the exchanges thus ensuring that latest status of orders and trades is available to the investors," the regulator said in the circular.
SEBI noted that the stock exchanges should ensure credible and periodic testing of the IRRA platform is carried out from time to time for the smooth functioning of the service.
"In case of disruptions after the cut-off time for enablement of IRRA service, exchanges, based on their assessment and in consultation with SEBI, may extend the market hours, if needed," it added.
