Internet Based Trading (IBT) & Securities Trading Using Wireless Technology (STWT)

Internet Based Trading (IBT) refers to the electronic submission of buy or sell orders through a broker’s web‑based platform using a computer or laptop connected to the internet. The order is routed directly to the exchange’s order‑matching engine without manual intervention.

IBT is important for the exam because SEBI treats it as a distinct distribution channel with specific compliance, audit, and risk‑management obligations. Brokers must maintain a secure server, provide real‑time market data, and ensure that client orders are executed in accordance with the exchange’s rules.

From a practical perspective, IBT enables investors to trade equities, derivatives, mutual funds, and bonds from anywhere in India, provided they have a stable internet connection. The exam frequently asks you to identify which activities are permissible under IBT and what disclosures a broker must make to clients.

• IBT covers both equity and derivative segments.
• Orders placed via IBT are subject to the same price‑time priority as floor‑based orders.

IBT platforms provide real‑time market depth, charting tools, and instant order confirmation. These features help investors make informed decisions and monitor their positions continuously.

Typical order types available on IBT include market orders, limit orders, stop‑loss orders, and bracket orders. The platform also supports margin trading, intraday square‑off, and portfolio tracking.

From a compliance angle, the broker must log every order with a timestamp, IP address, and device identifier. This audit trail is examined during SEBI inspections and is a frequent focus of NISM questions.

• Real‑time data – price quotes, order book, and news feeds.
• Self‑service – investors can modify or cancel orders without broker intervention.

SEBI’s Internet Trading Guidelines (circa 2014) mandate that brokers obtain a separate registration for their IBT portal and maintain a minimum net‑worth of INR 5 crore. The portal must be hosted on a server located within India and be protected by firewalls approved by the regulator.

Every client must complete KYC and also provide an electronic signature (e‑sign) or OTP verification before the first IBT transaction. Brokers are required to retain electronic records for at least five years and make them available to SEBI on demand.

For the exam, remember that failure to comply with these requirements can lead to penalties, suspension of the IBT licence, or even criminal prosecution. Questions often present a scenario where a broker omitted a required audit log – the correct answer highlights the regulatory breach.

Latency and system downtime are the primary operational risks for IBT. A delay of even a few milliseconds can cause order slippage, especially during high‑volatility events. Brokers must implement redundant servers and real‑time monitoring to mitigate this risk.

SEBI requires brokers to have a circuit‑breaker mechanism that automatically halts order entry if the platform experiences a critical failure. The broker must also publish a Business Continuity Plan (BCP) and conduct quarterly disaster‑recovery drills.

Exam questions frequently test your understanding of these controls by presenting a failure scenario and asking which regulatory provision has been breached. The correct answer will reference the mandatory BCP or circuit‑breaker requirement.

Securities Trading Using Wireless Technology (STWT) enables investors to place orders through mobile apps, tablets, or other handheld devices that connect to the internet via cellular networks (3G/4G/5G) or Wi‑Fi. The underlying process is identical to IBT, but the device and connectivity differ.

STWT has grown rapidly in India due to the proliferation of smartphones and affordable data plans. Brokers must ensure that their mobile applications are compliant with SEBI’s Mobile Trading Guidelines, which cover app certification, data encryption, and device authentication.

From an exam perspective, you may be asked to differentiate between IBT and STWT on the basis of device registration, security protocols, or the regulatory notice period for app updates.

All STWT applications must use end‑to‑end encryption (AES‑256) for data in transit and at rest. Two‑factor authentication (2FA) is mandatory – typically an OTP sent to the registered mobile number plus a device‑specific PIN.

Device registration is performed once per client. The broker stores a unique device identifier (IMEI/UDID) and flags any unregistered device attempting to log in. This helps prevent unauthorized access and satisfies SEBI’s “device‑binding” requirement.

Regular security patches and compliance audits are required every six months. Failure to update the app within the stipulated time can attract a penalty under SEBI’s “Non‑Compliance with Security Standards” clause, a point often tested in scenario‑based questions.