Investor Risk Reduction Access platform

What’s in today’s article?

• Why in news?
• Investor Risk Reduction Access (IRRA)
• What is the IRRA platform?
• Need for such platform
• Functioning of IRRA platform
• How will the platform help investors?

Why in news?

• The Securities and Exchange Board of India (SEBI) has launched the Investor Risk Reduction Access (IRRA) platform at the Bombay Stock Exchange (BSE).
• IRRA is a platform that will act as a ‘safety net’ for investors in case of technical glitches faced by a trading member or a stock broker registered with SEBI.

What is the IRRA platform?

• About
  • IRRA platform has been developed to reduce risks faced by investors in the eventuality of technical glitches at the trading member’s end at both the primary site and disaster recovery site.
  • It will provide investors an opportunity to close open positions and cancel pending orders in case of disruption at the stock brokers’ end.
    • An open position is a trade which is still able to generate a profit or incur a loss.
  • In other words, IRRA platform can be used in case of technical glitches or unforeseen outages that render the trading member’s site inaccessible.
    • The IRRA platform has been designed to reduce risks for investors participating in the market.
    • It is not meant for taking fresh positions or orders, but only to cancel the pending orders.
• Developed by
  • IRRA has been jointly developed by all the stock exchanges – BSE, NSE, NCDEX, MCX and Metropolitan Stock Exchange of India (MSE).
• Timeline for a trading member to request migration to the IRRA platform
  • Before requesting stock exchanges to migrate to the IRRA platform, trading members are required to put efforts into restoring the primary and DR sites.
  • A trading member can let the stock exchange know through email if they want to switch to the IRRA platform.
  • They can do this either before the market session begins or after it starts.
  • However, it has to be at least 2.5 hours before the scheduled end of the market hours for the segment where they have an open position.
• Reverse migration of a trading member from the IRRA platform
  • Based on the trading member’s request and confirmation from all exchanges, the IRRA system services will be shut down to enable the trading member to resume business from the original trading system.
  • Only one reverse migration will be allowed during a trading day.
  • The request for reverse migration needs to be submitted at least 1 hour before the scheduled closure of the market in which the trading member holds an open position.

Need for such platform

• With increasing dependence on technology in the securities market, there has been a rise in instances of glitches in trading members’ systems.
• These instances often lead to disruption of trading services and investor complaints.
• In such scenarios, investors with open positions are at risk of non-availability of avenues to close their positions, particularly if markets are volatile.
• SEBI had announced in December 2022 that:
  • if trading members face challenges like being unable to move to the Disaster Recovery site within stipulated time during a crisis or dealing with cyber-attacks, stock exchanges will offer a backup service to handle such disruptions.

Functioning of IRRA platform

• Trading members can use IRRA when they encounter technical issues at their end that affect their ability to service clients across exchanges from both – the primary site and disaster recovery site.
• Stock exchanges can also independently activate the IRRA service by monitoring factors like connectivity, order flow, and social media posts.
  • They can do this even without a specific request from a trading member if it is deemed necessary.
  • This service shall be enabled by the exchanges, suo moto, only in case of disruption of trading services of trading member across all the exchanges.

How will the platform help investors?

• Once the investors are authorized to access of the IRRA platform, investors can:
  • view and cancel pending orders across all segments and all stock exchanges from the order book,
  • square off/close the open positions across segments and exchanges

Q1) What is a Stock exchange?

Stock Exchange market is a vital component of a stock market. It facilitates the transaction between traders of financial instruments and targeted buyers.

Q2) What is Metropolitan Stock Exchange of India?

The Metropolitan Stock Exchange of India Limited (MSE) is a national stock exchange owned by the Ministry of Finance, Government of India. It's one of nine stock exchanges in India recognized by the Securities and Exchange Board of India (SEBI).

Source: What is the new Investor Risk Reduction Access platform, and how it stands to benefit investors | SEBI | Economic Times