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TMI BlogStandard Operating Procedure for handling of technical glitches by Market Infrastructure Institutions (MIIs) and payment of “Financial Disincentives” thereofX X X X Extracts X X X X X X X X Extracts X X X X ..... oning of the securities market. 2. With increasing dependence on technology, as the operations and functioning of MIIs are fully automated right from order entry to order matching to trade confirmation leading up to clearing and settlement of trades, the instances of technical glitches at MIIs, leading to business disruption/unavailability of services provided by MIIs, have been occurring, despite various mechanisms stipulated by SEBI such as Business Continuity Planning, Disaster Recovery policies, System Audit etc. 3. The general practice in the computing/technology industry to deal with business disruption/unavailability of services, is to work with specified downtime and for downtimes beyond such specified time, a pre-defined penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Investor Protection Fund / Core Settlement Guarantee Fund maintained by the MII. 7. 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. 8. This circular is available on SEBI website at www.sebi.gov.in under the categories "Legal Framework" and "Circulars". 9. 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. Yours faithfully, Ansuman Dev Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular dated March 22, 2021 having reference number SEBI/HO/MRD1/DTCS/CIR/P/2021/33 - shall be reported immediately upon declaration of disaster. (ii) Preliminary report within 24 hours of the occurrence of the glitch. (iii) 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 and confirming compliance with their observations. (iv) RCA submitted by the MIIs should inter-alia include exact cause of the technical glitch (including root cause from vendor(s), if applicable), exact duration of the technical glitch, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive" structure with regard to handling of technical glitches Failure to timely submit RCA 1. In case of delay in submission or submission of incomplete/ inadequate RCA by an MII, a "financial disincentive" of ₹ 1,00,000 per working day shall be paid by the MII for each working day of delay from the timeline specified at Para 2.1(iii) of Annexure- I of this Circular or any revised timeline specified by TAC/SEBI for submission of exact RCA. Failure to timely address technical glitch 2. In order to ensure that MIIs address technical glitch within the timeline specified by TAC/SEBI, the following progressive slab-wise "financial disincentive" shall be paid from the expiry of the timeline specified by TAC/ SEBI: S No. No. of working ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the RTO prescribed by SEBI, i.e. to restore operations of 'Critical Systems' including from Disaster Recovery Site within 45 minutes of declaration of Disaster, the following "financial disincentive" shall be paid: S No. Failure to restore operations within the RTO prescribed by SEBI Financial disincentive Equivalent (Rs.) i. Financial disincentive on MII 10% of average of standalone net profit for previous two financial years or ₹ 2 cr., whichever is higher. ii. Financial disincentive on MD and CTO of MII separately 10% each of their annual pay (both fixed and variable components) for the financial year when the disaster occurred "Financial disincentive" under Clause 3 and Clause 4 above, in relation to the same disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture shall be credited by MII to the following funds maintained by it : S No. Financial Disincentive on MIIs, MD and CTO Credited to Funds i. Stock Exchange Investor Protection Fund (IPF) ii. Clearing Corporation Core Settlement Guarantee Fund (Core SGF) iii. Depositories Investor Protection Fund (IPF) 8. Further, the MII shall submit a compliance report within 90 days of occurrence of disaster/ business disruption to SEBI providing details of payment of "financial disincentives" including computation of "financial disincentives" as per the SOP and the date when the amount was credited to the aforementioned funds. With regard to "financial disincentive" on the MD/CTO of the MII arising out of the variable pay component, the c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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