The Securities and Exchange Board of India (SEBI) has recently introduced the Investor Risk Reduction Access (IRRA), aiming to provide a ‘safety net’ for investors during the occurrence of technical issues experienced by a trading member or stock broker. A trading member or stock broker is either an individual or firm, authorised to buy and sell securities on behalf of investors in financial markets. They facilitate transactions throughout the stock market or within other financial exchanges, acting as intermediaries between buyers and sellers.
An Insight into the IRRA Platform
Designed to minimise risks investors may encounter due to technical glitches at a trading member’s end, the IRRA platform provides an alternative means of squaring off or closing open positions, as well as cancels pending orders. It is important to note that this platform is not intended for the execution of fresh positions or orders.
Among those responsible for the development of the IRRA are multiple stock exchange groups – BSE (Bombay Stock Exchange), NSE (National Stock Exchange), NCDEX (National Commodity and Derivatives Exchange), MCX (Multi Commodity Exchange), and the Metropolitan Stock Exchange of India (MSE).
Working Mechanism of IRRA
The platform is accessible to trading members experiencing a technical hiccup that affects their capability to service clients. This includes instances where problems occur at both the primary site and the disaster recovery site. Additionally, stock exchanges can monitor parameters such as connectivity, order flow, and social media posts, and may proactively initiate the IRRA service if necessary, irrespective of any request by the trading member. However, this service will only be activated by the exchanges in the event of a disruption of trading services across all exchanges where the trading member operates.
The Need for IRRA
The growing prevalence of technical glitches disrupting trading services presents a risk to investors, especially in unstable markets with no mechanism to close positions. Despite the existence of business continuity plans, issues such as delayed recovery sites or cyber-attacks can persist. The IRRA platform serves as a contingency service provided by stock exchanges during such crises, ensuring investor protection.
UPSC Civil Services Examination – Previous Year Question
A question posed in the 2019 UPSC Civil Services Examination asked, “Which of the following is issued by registered foreign portfolio investors to overseas investors who want to be part of the Indian stock market without registering themselves directly?” The options were (a) Certificate of Deposit, (b) Commercial Paper, (c) Promissory Note, and (d) Participatory Note, with the correct answer being (d).
