New SEBI rules on trading via wireless technology

All brokers registered with the Securities and Exchange Board of India (SEBI) and providing internet-based (online) trading will be allowed to offer securities trading using wireless technology, the market regulator said in a circular issued on Friday.

All other relevant requirements needed for online trading would also be applicable to securities trading using wireless technology. Devices such as mobile phones and laptop with data card are included in the wireless technology category.

To ensure adequate safety and security of such transactions, SEBI has stipulated strict guidelines for brokers. It has asked stock exchanges to ensure brokers adhere to the guidelines. The guidelines say there should be secure access, encryption and security of communication for online trading and securities trading using wireless technology.

Brokers have to take adequate measures for user identification, authentication and access control using means such as user-id, passwords, smart cards, biometric devices or other reliable means, to prevent misuse of facility by unauthorised persons. Unique identification number as given in case of online trading should be made applicable for securities trading using wireless technology.

There should be alternative means of communication for placing orders should be available in case of failure of the wireless network, alternative means. Further, the regulator has asked brokers to specify possible risks, responsibilities and liabilities associated with securities trading using wireless technology in the broker-client agreement.

Among other security measures, exchanges have been asked to ensure that session login details are not stored on the devices used for trading using wireless technology, prevalent industry standard are followed for network security protocols and interface standards and the broker’s server routing orders to the exchange trading system is located in India.

Stock exchanges have been asked to arrange for periodic systems audits of broker systems to ensure that requirements specified in the circulars are being met and to include securities trading using wireless technology in their ongoing investor awareness and educational programme.

They have also been asked to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.