Standard Operating Procedure for handling of technical glitches by Market Infrastructure Institutions (MIIs) and payment of “Financial Disincentives” thereof
Summary
This circular establishes a Standard Operating Procedure for Market Infrastructure Institutions to handle technical glitches and outlines a financial disincentive structure for non-compliance. It mandates specific reporting timelines to SEBI, including immediate notifications, preliminary reports, and comprehensive Root Cause Analysis documents. The document further specifies progressive monetary penalties for delays in submitting these reports or failing to resolve the glitches within prescribed timeframes. This section establishes financial disincentives for Market Infrastructure Institutions (MIIs) failing to declare disasters, restore operations within specified timelines, or resolve non-disaster business disruptions. It mandates that these penalties be credited to specific investor protection and settlement funds and requires MIIs to incorporate these obligations into executive appointment terms. Additionally, it imposes strict reporting deadlines on MIIs to disclose the payment of such disincentives to SEBI.
Text
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.
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 ... and Chief Technology Officer ... of the MII.
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.
The aforesaid “Financial Disincentives”, when triggered automatically under pre-defined 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.
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.
This circular shall come into effect from August 16, 2021 and shall supersede the SEBI directions dated August 06, 2019 to the MIIs having reference no. SEBI/HO/MRD/DOP1/OW/P/20062/7/2019 with regard to handling of technical glitches.
Technical glitch shall mean any malfunction in the systems of an MII. Malfunction in the systems of the MII shall include malfunction in its (a) hardware, or; (b) software, or; (c) any products/ services provided by the MII... which may lead to either stoppage or variance in the normal functions/ operations of systems of the MII.
The following reporting structure for technical glitches shall be adopted by the MIIs: No business disruption -> SCOT of MII, Governing Board of MII; Business disruption -> SCOT of MII, Governing Board of MII, SEBI.
Information of technical glitch on immediate basis but not later than 2 hours from the time of occurrence of the glitch; provided that glitches of the nature of a disaster... shall be reported immediately upon declaration of disaster.
Preliminary report within 24 hours of the occurrence of the glitch.
Comprehensive Root Cause Analysis (RCA) report and corrective action taken to address the technical glitch within 21 days of the incident. Such report shall be submitted to SEBI, after placing the same before the Standing Committee on Technology and the Governing Board of the MII...
RCA submitted by the MIIs should inter-alia include exact cause of the technical glitch..., exact duration..., chronology of events..., recommendations of SCOT / Governing Board of MII, details of corrective/ preventive measures taken...
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Standard Operating Procedure for handling of technical glitches by Market Infrastructure Institutions (MIIs) and payment of “Financial Disincentives” thereof. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.