Sebi asks exchanges to expedite software approval for brokers

Market regulator Sebi today asked stock exchanges to adopt a faster approval process for trading systems and software tools used by brokers, if they have already been tried and tested.
At the same time, exchanges also need to put in place a suitable mechanism to prevent any unauthorised change to the approved software, Sebi said in a circular.
The Securities and Exchange Board of India (Sebi) last year made it mandatory for brokers and traders to get their trading systems and software tools tested and audited in consultation with bourses in order to check stock market losses caused by technical glitches.

After consultation with its Technical Advisory Committee (TAC) on streamlining and strengthening the process of testing of software, Sebi has now decided to revise the requirements.
Accordingly, stock exchanges can now prescribe a faster process to make the process of approval expeditious with respect to testing of software related fixing bugs, changes required in broker systems because of changes in exchange system, and for software purchased from an approved vendor already tested in mock environment.
The stock exchanges may suitably schedule the requirements of mock testing, certification of test reports by system auditor and the software approval process so as to facilitate a speedy approval and a smooth transition of the brokers to the upgraded software, Sebi said.

With regard to updates to broker's trading software that intend to modify the 'look and feel' and do not affect the risk management system of brokers, Sebi said mock testing and consequent system audit may not be insisted upon by stock exchanges.
The regulator said stock exchanges would have to direct their brokers to put in place adequate mechanism to restore their trading systems to 'production state' at the end of testing session so as to ensure integrity of brokers' trading system.
To ensure that brokers are not using software without requisite approval of exchanges, bourses are advised to put in place a mechanism to prevent any unauthorised change to the approved software.