Trading apps are meant to make the life of a trader smoother, but technical glitches can turn things south where a single glitch leads to losses worth crores.
As per the NSE report, 146 technical glitches in brokers’ apps were reported in the financial year 2022-23. Talking about the current financial year, there are around 49 technical glitches reported till June.
Not only small brokers, but top brokers like Zerodha, Angel One, Motilal Oswal, and Kotak Securities are also included in this list with a maximum of 6 and a minimum 2 major/minor glitches in a year.
Beyond brokers’ apps, the month of July witnessed a major glitch in the BSE where thousands of traders lost capital worth crores.
The question now is whether this issue will ever be resolved. Despite so many glitches, why is SEBI not taking any serious action? Does this mean SEBI does not care about retail traders? If that is true, what would be the future of retail traders in the stock market?
Let’s explore how technical glitches impact traders, what initiatives SEBI can take to control app glitches, and what a retail trader must do to protect their capital.
Impact of Technical Glitches
Although the number of retail traders has increased in the last few years seeing the number of glitches on trading platforms has raised concerns. Despite the positive momentum, the increasing frequency of technical glitches on trading platforms has raised concerns.
Some of the common issues are:
- App Stop Working: Unable to log, execute, or exit the trades during the peak trading hours results in huge financial losses of retail traders.
- Order Execution Delays: Traders miss opportunities in trade due to delays in order execution impacting them financially & mentally.
- Data Feed Issues: Sometimes the glitch results in a delay in updating data that leads to incorrect decision making thus increasing challenges & losses for retail traders.
Our team came across one such case where Mr. Ashutosh (name changed) lost ₹73,000 due to BSE Glitch on July 12, 2024. He told us that he opened a position on the Put side in the morning but seeing the market in an uptrend, he closed his position.
To take advantage of the trending market, he opened another position on the call side by adding a Limit Order. But by the time the value of the asset increased beyond the limit price.
He then decided to cancel the order at 10:57 AM but failed to do so. Assuming it to be an internet issue he tried using different connections. He then asked his wife who was in a different location to cancel his position.
She did it successfully. But around 11:19 AM, Mr. Ashutosh received a message that his order had been executed. Confused Ashutosh, when opened the app found that the order was executed at a price different from the value at the time.
On in-depth analysis, he found that the order book showed a different report, according to which the order was executed at 11:08 AM. He then checked his app where no such details were displayed between 11:08 AM to 11:19 AM.
Later he found that, that all happened due to a glitch in BSE SENSEX. But that left the question, if there was a glitch how did his order get executed? And if the order got executed, why was it not displayed in the app?
So, was it just the broker’s glitch or a glitch in the broker’s app as well?
Well, with certain proof in hand, he reached out to SEBI for recovery of losses and is just left with the hope of getting a satisfactory response.
Abhijeet was not the only one who faced losses due to the glitch in SENSEX; many other traders experienced both big and small losses. Some reported the issue to SEBI, while others remained quiet, consoling themselves.
Impact of Technical Glitches on Retail Traders
Any minor or major app glitches leave a long-term impact on retail traders, which includes:
- They Suffer Financial Losses: Technical glitches do not let traders take and exit trades at the right time leading to substantial financial losses
- It Kills their Trust: Repeated technical issues can erode the trust of retail investors in trading platforms, causing them to question the reliability of these services.
- It Affects their Psychology: Retail traders are aware of market risks and develop their setups accordingly. However, increasing technical glitches have a huge impact on their psychology increasing the chance of more losses in trades.
What SEBI Can Do to Address Technical Glitches?
In 2021, SEBI issued an order stating that Market Infrastructure Institutions (MIIs), including Stock Exchanges, Clearing Corporations, and Depositories, must provide the infrastructure necessary for the smooth and uninterrupted functioning of the securities market.
To keep a check and control glitches, SEBI specified predefined thresholds for system downtime of MIIs. If the downtime exceeds the limit, the MIIs, their Managing Director, and CTO are liable to pay ‘Financial Disincentives.’
This was done to encourage MIIs to constantly monitor the performance and efficiency of software and trading apps.
Unfortunately, app glitches didn’t reduce even after such strict action by SEBI. SEBI must have made it stronger but instead, recently SEBI removed such rules, and no member of MII would be penalized for technical glitches.
This raises many questions in the minds of retail traders.
Does SEBI even care for retail traders? If a retail trader ever encounters such a glitch, the best they can do is report it to the SCORES portal and wait for a satisfactory response.
SEBI takes action only if there are valid proofs of losses due to technical glitches.
What Retail Traders can do to Protect themselves from Technical Glitches?
While the increasing number of technical glitches poses a challenge, the future of retail trading in India remains promising. Here are some ways traders and platforms can navigate this landscape:
- Diversification of Platforms: Traders should consider diversifying their trading platforms to reduce the risk of being affected by a single point of failure.
- Risk Management Strategies: Implementing robust risk management strategies, such as setting stop-loss orders and being prepared for unexpected app glitches, can help traders protect their investments.
- Continuous Monitoring and Improvement: Trading platforms must continuously monitor their systems and invest in improvements to enhance their reliability and performance.
- Transparent Communication: Platforms should maintain transparent communication with their users about any technical issues and the measures being taken to resolve them.
Conclusion
The rise of retail trading in India has been a transformative development, opening up the financial markets to a broader audience. However, the increasing number of technical glitches poses significant challenges.
SEBI must adopt best practices to safeguard the interest of retail traders in the securities market by providing them a better solution and by penalizing stock brokers on the occurrence of such glitches.
