SEBI

Investor Risk Reduction Access Platform Due To Disruption in Trading Service

The increase in technology dependence has led to major problems in the working of various segments of the market. The SEBI^[1] has observed the same problems in the securities market. The increasing dependency on technology in the securities market has led to a rise in technical glitches in the system of trading members. This problem has led to disruptions in trading services and investor complaints. Due to this, the investors with open positions are at risk of the non-availability of avenues to close their positions, especially when the markets are volatile. With the aim of solving this problem, the SEBI has consulted with the Stock exchanges, clearing corporations and trading members as it is observed that in some cases, the trading member is unable to move to Disaster Recovery Site within the stipulated time or unable to protect itself from cyber-attacks etc. Henceforth, the SEBI has decided to establish a contingency service known as Investor Risk Reduction Access Platform (IRRA) by issuing “Introduction of Investor Risk Reduction Access (IRRA) platform in case of disruption of trading services provided by the Trading Member (TM)” dated 30^th December 2022 which shall be provided to the stock exchange in case of any disruption.

Development of the Investor Risk Reduction Access

The stock exchanges are required to develop an Investor Risk Reduction Access Platform service which will provide the investors with an opportunity to square-off or close the open positions and cancel the expensing orders if there is any disproportion in the trading services of the trading member. The IRRA must be developed as such to provide support to multiple segments across multiple exchanges.

Enablement of IRRA service

The relevant provision relating to the enablement of Investor Risk Reduction Access platform services are:

1. Request for enablement: The Trade members, upon facing disruption in their trading service due to technical glitches, may request to the stock exchange for enablement of IRRA service, which shall be enabled upon receipt of such request.

2. Suo moto enablement of service: The stock exchanges are required to monitor parameter like connectivity, Order flow, social media posts etc., and suo moto initiate the enablement of service if there arises any necessity irrespective of any request made by the trading member. However, such a service can be initiated suo moto only when the trading services are disrupted across all the exchanges.

3. Disruption of trading services of TM: The trading member has to request for the enablement of service if it is a member with one or more of the stock exchanges. In this case, the trading member shall use the IRRA service in regard to all the exchanges.

Accessibility of the service to Investors

The intimation of enablement of service shall be intimated to the investors in the following ways:

1. Communication of availability of Service: The stock exchange is required to inform all the investors of the trading member of the availability of the IRRA service through e-mail/SMS and through a public notice that shall be disseminated on their websites. The trading member is also required to display the same on their website.

2. Accessibility by the Investors:  The investors can log in to the service using either through Unique Client Code or PAN number, and they shall be authorized by OTP, which shall be sent to their registered number and E-mail Ids.

Actions to be taken on IRRA service

The services which the investors can take after the authorization are:

• The investors can square off or close the open positions across segments and exchanges
• The investor can cancel the orders across pending segments at the exchanges.

Further, the conditions in regard to the services are:

• The IRRA service should not permit activity that increases the risk to the investor.
• The IRRA service must provide access to the Trading member through which it can monitor the actions of the investors. The trading members shall maintain such instructions.
• If the enablement of IRRA service takes place through cyber-attacks, in that case, the admin terminal shall be must be on a network other than a network which was subject to cyber-attack to protect the other critical infrastructure.
• The trading member will still be responsible for all the activities on IRRA in respect of all the obligations, including margin requirements and settlement.

Reverse Migration to Trading Member Systems

There shall be reverse migration when the technical glitches are successfully resolved in the following manner:

• The stock exchanges are required to design a detailed framework for the IRRA system to the trading members trading system when the trading system is fully resolved, and a request is made in this regard.
• The trading member shall update their systems taking data from the exchanges after the revival of its trading system, to ensure that the latest status of orders and trades are available to investors.
• The stock exchanges will decide on the reverse migration based on various parameters like the size of the broker, the time required for reverse migration and the remaining time for the trading session.

Other conditions for the IRRA service

The other conditions for the Investor Risk Reduction Access platform services are:

• The stock exchange must ensure that they credibly and periodically test the IRRA service platform for the smooth functioning of the service.
• The stock exchanges should issue guidelines in this regard giving details pertaining to cut-off times for enablement of IRRA service, handling of various scenarios of open positions, framework for reverse migration etc.
• The stock exchange must extend the market hours after their assessment and consultation with the SEBI if disruptions are caused after the cut-off time.
• The stock exchanges and clearing corporations must put in place systems to ensure that there is compliance with the above provisions on or before 1^st October 2023.

Directions for stock exchanges

The stock exchanges are directed to:

1. Set up the Investor Risk Reduction Access platform service.
2. Intimate to the member or participants about the above provisions.
3. Make necessary bye-laws, rules s and regulations.
4. Communication of monthly milestones to SEBI and in their monthly development reports.
5. Publish detailed guidelines and frequently asked questions.

Conclusion

The SEBI, in consultation with the stock exchanges and clearing corporations, has issued the current circular with the aim of rectifying the problems arising from the technical disruptions in the trading services. In order to address the situation of the investors with the open position, the SEBI has opined to establish an Investor Risk Reduction Access Platform. The investors can avail of the benefits of this service and can square off or close the open positions across segments or cancel the order across the segments. Further, the stock exchanges shall reversely migrate all the services back to the trading system of the trading member after the technical glitches are revived successfully.

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