SEBI new rule, MIIs will have to pay damages if there is a glitch in the market

The Securities and Exchange Board of India (SEBI) has made it clear that market infrastructure institutions (MIIs) will have to pay a fine if there are technical glitches in the market. In case of any technical glitch in the market, MII will have to submit the detailed Route Cause Analysis Report to SEBI within 21 days.

MIIs are responsible for the exchange of stocks, settlement, and keeping the securities in dematerialized form in the market.

While issuing the circular, SEBI has said that- MIIs are an important institution, as they provide the necessary infrastructure for the smooth and continuous functioning of the market. For any downtime or non-availability of services, beyond the predetermined time, it needs to be ensured that a ‘Financial Disincentive’ is paid. Along with the MII, their Managing Director (MD) and Chief Technology Officer will also be the participants of the fine.

SEBI believes this move will encourage MIIs to continuously monitor the performance and efficiency of their systems and upgrade the systems from time to time. This will motivate them to avoid any possibility of technical glitches, disruptions or calamities and to resume their operations expeditiously in the event of any such incident.

What is SEBI’s new rule:

Under this new detailed Standard Operating Procedure (SOP) of SEBI, now the MII will have to give a detailed report about the root cause and rectification of any technical glitch in the market. Any delay in submitting the complete report or report will lead to heavy damages to MII

This rule of SEBI will come into effect from 16 August 2021.

In February this year, trading was disrupted for about 4 hours due to a technical glitch in the National Stock Exchange (NSE). After which the Finance Ministry took cognizance of the matter and reprimanded SEBI.