MUMBAI: Markets regulator Sebi on Monday said that exchanges and other financial market intermediaries could pay up to 10% of the average net profit of the two previous years in penalty in case of any delay or failure to report technical glitches that disrupt normal trading operation. It also said that in addition, the MD and the CTO of the exchange could be penalised to pay up to 10% of their annual salary in case of such delays or failures.
In February this year, Sebi had said it was in the process of forming a comprehensive policy with financial disincentives built in for such failures by exchanges and other financial market intermediaries, comprehensively called market infrastructure institutions (MIIs). The markets regulator has also come out with a detailed standard operating procedure (SOP) for all MIIs. These institutions include exchanges, clearing corporations and depositories.
Sebi has put in timelines for corrective actions relating to various types of technical glitches. It also said that any technical glitch leading to trading disruption should be reported to Sebi, a prompt root cause analysis (RCA) carried out and a report submitted to the regulator within 21 days of the incident. In case of failure to adhere to these deadlines, the MII will have to pay a monetary penalty of Rs 1 lakh for each missed day of reporting, which could increase to up to Rs 25 lakh.
Sebi also said that in case of “disruption of any one or more of the ‘critical systems’, the MII shall, within 30 minutes of the incident, declare that incident as ‘Disaster’”.
If the MII fails to report such a disaster, the institution will pay “10% of average of standalone net profit for previous two financial years or Rs 2 crore, whichever is higher”. It also said that the MD and the CTO of the MII will have to pay a penalty equal to “10% each of their annual pay (both fixed and variable components) for the financial year when the disaster occurred”.
To avoid technical glitches, Sebi also said that MIIs should also put in place business continuity plans, disaster recovery policies and system audit processes.
In February this year, Sebi had said it was in the process of forming a comprehensive policy with financial disincentives built in for such failures by exchanges and other financial market intermediaries, comprehensively called market infrastructure institutions (MIIs). The markets regulator has also come out with a detailed standard operating procedure (SOP) for all MIIs. These institutions include exchanges, clearing corporations and depositories.
Sebi has put in timelines for corrective actions relating to various types of technical glitches. It also said that any technical glitch leading to trading disruption should be reported to Sebi, a prompt root cause analysis (RCA) carried out and a report submitted to the regulator within 21 days of the incident. In case of failure to adhere to these deadlines, the MII will have to pay a monetary penalty of Rs 1 lakh for each missed day of reporting, which could increase to up to Rs 25 lakh.
Sebi also said that in case of “disruption of any one or more of the ‘critical systems’, the MII shall, within 30 minutes of the incident, declare that incident as ‘Disaster’”.
If the MII fails to report such a disaster, the institution will pay “10% of average of standalone net profit for previous two financial years or Rs 2 crore, whichever is higher”. It also said that the MD and the CTO of the MII will have to pay a penalty equal to “10% each of their annual pay (both fixed and variable components) for the financial year when the disaster occurred”.
To avoid technical glitches, Sebi also said that MIIs should also put in place business continuity plans, disaster recovery policies and system audit processes.
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