MUMBAI: Markets regulator Sebi is considering putting in place a system for compensating investors for losses incurred due to technical glitches at exchanges, brokers, depositories and other market infrastructure intermediaries (MIIs). Whenever there’s a technical problem with any of the intermediaries, investors stand to face some loss.
“Sebi is actively considering a proposal to introduce a framework for ascertaining the incidents of technical glitches where compensation needs to be paid to the investors and to devise a methodology and calculation of compensation,” the regulator said in its annual report.
Over the years, there have been several technical glitches on the bourses’ trading platforms, impacting regular trade operations. There have also been cases of technical problems at the brokers’ end, more so as the buying-selling-settlement processes on the exchanges have increasingly become tech-dependent.
Sebi also plans to evaluate the use of smart contracts in the securities market and frame necessary policies for the use of the same. “Smart contracts digitalise trust in a way that makes transactions robust, safe and enforceable anywhere. Smart contracts have the power to make the stock market faster and cheaper and streamline post-trade settlement,” the annual report noted.
The markets regulator is also expected to come out with a compliance code for index providers, the companies which construct and manage market indices like the sensex, Nifty and other such benchmarks. Derivatives contracts based on such indices, worth thousands of crores of rupees, are traded every day by investors.
Sebi also said it was studying the feasibility to introduce derivatives contracts on freights on commodities derivatives segments of the market. Further, to prevent the fragmentation of liquidity among various stock exchanges in the commodities segment and to develop and deepen the commodity derivatives markets, Sebi will explore a proposal to allow only unique sets of commodities to be traded at each exchange, the annual report noted.
Sebi is also considering a proposal to ascertain the optimum corpus for the investor protection fund of the stock exchanges “on the basis of rigorous stress-testing, so as to ensure that the legitimate claims of the clients of the defaulting members/brokers even in extreme times are met”. Sebi will also review the quantum of settlement guarantee fund (SGF) of the clearing corporations based on the stress test, so as to increase the resilience of the markets to possible risks posed by extreme volatility, it said in the annual report.