Securities and Exchange Board of India (Sebi) on Friday relaxed the rules governing financial disincentives imposed on Market Infrastructure Institutions (MIIs) and individuals for omissions and commissions leading to technical glitches. In a circular issued on Friday, Sebi restricted the imposition of existing financial disincentives to MIIs only. From now on, it will also provide an opportunity to the concerned MII to make its submission in respect of a glitch before imposing any financial disincentive as per the current framework.The market watchdog has also removed Managing Director (MD) and Chief Technology Officer (CTO) out of the purview of financial disincentives.The reference of 'Financial disincentive on Managing Director (MD) and Chief Technology Officer(CTO) of MII Separately' in certain clauses of master circulars on Stock Exchanges and Clearing Corporations and on Depositories has been deleted by Sebi. These rules fixed liability on MD and CTO of the MIIs. The above move is with a view to promote ease of doing business in the domestic stock markets, the circular said.The prescribed Standard Operating Procedure (SOP) for handling of technical glitches by MIIs and payment provided for automatic trigger of financial disincentive on the MII and individuals i.e. MD and the CTO of the MII if predefined criteria in handling of technical glitches was not adhered to.The decision to remove MD and CTO from the purview of financial disincentive was because the regulator felt fixing the liability on individuals would require "application of mind and assessment". MIIs will have to carry out internal examination related to occurrence of technical glitches to ascertain individual accountability and take appropriate action including suitable recording and reckoning in the performance appraisal of those individuals.However, SEBI would retain the right to initiate enforcement action against the individuals at the MII, if there is sufficient ground to do so.MIIs will also be required to submit a compliance report within 90 days of occurrence of disaster/ business disruption to SEBI providing details of payment of 'financial disincentives' including computation of 'financial disincentives' as per the SOP."Considering the criticality of smooth functioning of systems of MIIs (as any disruption adversely impacts all classes of investors / market participants as well as the credibility of the securities market), specifying a pre-defined threshold for downtime of systems of MIIs becomes desirable. For any downtime or unavailability of services, beyond such pre-defined time, there is a need to ensure that 'Financial Disincentive' is paid by the MIIs. This will encourage MIIs to constantly monitor the performance and efficiency of their systems and upgrade/ enhance their systems etc. to avoid any possibility of technical glitches/ disruption/ disaster and restart their operations expeditiously in the event of glitch/ disruption/ disaster," the circular said.SEBI received recommendations to review framework regarding imposition of financial disincentives on individuals. Sebi noted that operations of MIIs are increasingly becoming system driven, with operating constellation of IT systems having dependency on various vendors and service providers.