Technical glitches wouldn’t hinder your trading sessions as the SEBI launches ‘IRRA’ platform

Table of contents

1. Background
2. The problem in the existing clearing framework
3. Introduction of an ‘Investor Risk Reduction Access’ platform to address the issue
4. Who are Trading Members?
5. How IRRA would be activated in case of a trading disruption?
6. How can Investors access IRRA?
7. How will Investors be benefited from IRRA?
8. Directions given to the Stock exchanges and clearing corporations
9. Timelines for stock exchanges and clearing corporations and to implement the IRRA

1. Background

Ever faced a situation wherein you couldn’t square off your positions due to a technical glitch at the end of the services provided by the trading member? Now, to address this issue, the SEBI has decided to put in place the Investor Risk Reduction Access (IRRA) platform by Oct 2023 to help investors if there is a disruption of services from the trading members’ end.

2. The problem in the existing clearing framework

As the use of technology in the securities market has increased, there have been more instances of issues with the systems used by trading members, which have caused disruptions in trading and complaints from investors. When this happens, investors who have bought or sold stocks but have not yet closed their positions, are at risk of not having a way to finish the trade, especially if the market is unstable. This can be a problem because it leaves investors uncertain about the status of their investments.

3. Introduction of an ‘Investor Risk Reduction Access’ platform to address the issue

The SEBI has introduced the Investor Risk Reduction Access (IRRA) platform in case of disruption of trading services provided by the Trading Member (TM). If a trading member’s business continuity plan cannot prevent disruption, such as the inability to move to a disaster recovery site within a certain time frame or a cyber attack, the stock exchanges will provide a contingency service to handle the situation. This service is being put in place because of the potential risks that disruptions can pose to investors.

Investor Risk Reduction Access (IRRA) provide the investors an opportunity to square off/close the open positions and/or cancel pending orders in case of disruption of trading services provided by the Trading Member.

4. Who are Trading Members?

As per Regulation 2(u) of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, a “trading member” means a person having trading rights in any recognized stock exchange and includes a stock broker.

Trading members can execute trades on their own account as well as on account of their clients however, clearing and settlement of trades executed through the Trading Member would have to be done through a Trading-cum Clearing Member or Professional Clearing Member of the Exchange.

5. How IRRA would be activated in case of a trading disruption?

The IRRA would be activated in the following scenarios:

• • On the request of trading members
  • Suo-moto activation by stock exchanges

• • On the request of the Trading Members(TMs)

Trading members who experience technical problems that led to disruption of trading services can ask the stock exchanges to activate the IRRA service by following the procedures that have been set out by SEBI in this regard.

• • Suo moto activation by the stock exchanges

The stock exchanges will keep an eye on various factors such as connectivity, order flow, and social media posts, and will activate the IRRA service if necessary, even if a trading member has not requested it.

It is to be noted that the stock exchanges will only activate the IRRA service on their own if there is a disruption of trading services for the trading member across all exchanges where they are a member. If there is a disruption at just one or some exchanges where the trading member is a member, they can request the activation of the service and will be required to use it for all exchanges.

6. How can Investors access IRRA?

Once the service is enabled, all the investors of the TM shall be informed by the exchange of the availability of the service through email/SMS and public notice on exchange’s website. TMs shall also communicate the same by displaying it on their website.

Investors can log in to the service using either the Unique Client Code (UCC) or the PAN number and they shall be authorized by a One Time Password (OTP) to be sent to their registered mobile numbers and email ids.

7. How will Investors be benefited from IRRA?

You must be wondering how investors will be benefited from the enablement of the IRRA.

The IRRA enablement will help the investors as follows:

• • The investors can square off/close the open positions across segments and exchanges.
  • Investors can cancel the orders across segments that are pending at the exchanges.
  • The IRRA service shall not permit any action that increases the risk of the investor.
  • IRRA service shall also provide the TM with access to an Admin Terminal, through which the TM can monitor the actions of investors and also carry out the actions as mentioned in clauses (a) & (b).

8. Directions given to the Stock exchanges and clearing corporations

The Stock Exchanges shall ensure that credible and periodic testing of the IRRA platform is carried out from time to time for the smooth functioning of the service. Further, the stock exchanges are directed to set up the IRRA platform and communicate to SEBI, monthly milestones as per the implementation plan and status against the milestones including, in their monthly development reports and to further publish detailed guidelines/Frequently Asked Questions (FAQs) in this regard.

9. Timelines for stock exchanges and clearing corporations and to implement the IRRA

The Stock Exchanges and the Clearing Corporations shall put in place appropriate systems to ensure compliance with the provisions of this circular on or before October 01, 2023