Securities Trading using Wireless Technology
Also written STWT · Securities Trading using Wireless Technology (STWT)
Trading through internet-protocol devices such as mobile phones or laptops with a data card, available only to brokers already eligible for Internet Based Trading and governed by the same conditions.
In plain language
A client checking prices and placing orders from a mobile phone is not using a fundamentally different system from Internet Based Trading — the order still travels over the internet to the exchange. What changes is the device, and a handful of rules written specifically for how small, portable screens and wireless connections behave.
Securities Trading using Wireless Technology, STWT, is that mobile layer on top of IBT. A broker cannot offer it in isolation; it can only offer STWT if it is already permitted to offer IBT in the first place.
How it works
The workbook (Chapter 8, section 8.8) states that SEBI-registered brokers who provide IBT shall be eligible to provide STWT, and that all relevant requirements applicable to IBT also apply to STWT. STWT specifically covers devices such as mobile phones and laptops with a data card that use Internet Protocol (IP).
On top of the shared IBT conditions, STWT carries its own extra points:
- The same unique identification number used for internet-based trading applies to STWT as well.
- If the wireless network fails, alternative means of communication for placing orders must be available.
- Because detailed information cannot easily fit on a hand-held device, the broker must at minimum give the address of the website or web page where full information is available.
- Session login details must not be stored on the devices used for STWT (the same rule applies to IBT).
- Additional risks, responsibilities and liabilities specific to wireless trading must be added to the Broker-Client agreement, as an addendum, or otherwise brought to the client's notice with their concurrence.
- Stock exchanges must include STWT in their ongoing investor awareness and education programmes.
A worked example
A broker already approved for Internet Based Trading — having met the Rs 50 lakh minimum net worth IBT required — wants to extend the same facility to a mobile trading app.
Because it already holds IBT approval, it is automatically eligible to offer STWT, subject to the same net-worth, encryption and risk-management conditions that applied to its IBT approval, plus the STWT-specific ones. The broker builds the app so that, if a client's mobile network connection drops mid-session, the client is told to use an alternative channel — say, calling the broker's dealing desk — to place urgent orders.
The app also does not store the client's login session on the phone itself, so a lost or stolen device cannot be used to place orders without the client logging in again. Given the small screen, the app shows only essential order details and a link to the broker's full website for anything more detailed.
Why NISM asks about it
Chapter 8 (section 8.8) treats IBT and STWT as one combined topic, explicitly stating that STWT eligibility rides on IBT eligibility and that IBT's conditions carry over. Expect a question testing that dependency — a broker cannot offer STWT without first being permitted to offer IBT — and the device definition (mobile phones, laptops with a data card, using IP).
Common exam traps
- STWT eligibility depends on IBT eligibility — a broker must already be permitted to offer IBT before it can offer STWT.
- All IBT requirements carry over to STWT — net worth, encryption, audit trails and risk management are not relaxed just because the device is a phone.
- STWT is defined by IP-based devices — mobile phones and laptops with a data card — not by any and every remote trading method.
- Session login details must never be stored on the device, and an alternative communication channel must exist for when the wireless network itself fails.
- Do not treat STWT as a separate registration from IBT — the workbook frames it as an extension of the same facility, not a standalone permission.
Check yourself
1.The minimum net worth for a broker providing Internet Based Trading on his own is:
- a)₹10 lakh
- b)₹50 lakh
- c)₹3 crore
- d)₹5 crore
Show the answer
Answer: (b) ₹50 lakh
The broker must have a minimum net worth of ₹50 lacs if the broker is providing the Internet based facility on his own. However, if some brokers collectively approach a service provider for providing the internet based trading facility, net worth criteria as stipulated by the stock exchange will apply.
And permission is required: SEBI Registered Brokers can introduce this service after obtaining permission from respective Stock Exchanges. The stock exchange should grant approval or reject the application as the case may be and communicate its decision to the member within 7 calendar days of the date of completed application submitted to the exchange.
IBT permission carries wireless with it: SEBI registered brokers who provide Internet Based Trading shall be eligible to provide securities trading using wireless technology. All relevant requirements applicable to internet based trading shall also be applicable to securities trading using wireless technology. STWT shall include devices such as mobile phone, laptop with data card, etc., that use Internet Protocol.
Do not confuse the figure with ₹3 crore for margin trading or ₹5 crore for a portfolio manager.
2.A SEBI-registered broker applies to a stock exchange for permission to offer Internet Based Trading. Within what time must the exchange communicate its decision?
- a)Within 30 days of the application
- b)Within 21 calendar days of the application
- c)Within 7 calendar days of the date of the completed application
- d)No time limit is prescribed
Show the answer
Answer: (c) Within 7 calendar days of the date of the completed application
The workbook: “SEBI Registered Brokers can introduce this service after obtaining permission from respective Stock Exchanges. The stock exchange should grant approval or reject the application as the case may be and communicate its decision to the member within 7 calendar days of the date of completed application submitted to the exchange.”
Also: “SEBI registered brokers who provide Internet Based Trading shall be eligible to provide securities trading using wireless technology”, and all IBT requirements apply to STWT too.
Why the others are wrong:
- 30 days — not the figure.
- 21 calendar days — the timeline for investor grievance redressal, not IBT approval.
- No time limit — a 7 calendar day limit is prescribed.
3.Which requirement applies to two-factor authentication for internet-based trading?
- a)Both factors may be passwords for convenience
- b)The two factors in the framework should not be the same
- c)Two-factor authentication is prohibited
- d)Only biometric factors are permitted
Show the answer
Answer: (b) The two factors in the framework should not be the same
Two-factor authentication for login session may be implemented for all orders emanating using Internet Protocol. Public Key Infrastructure (PKI) based implementation using digital signatures, supported by one of the agencies certified by the government of India, is advisable. Further the two factors in the Two-factor authentication framework should not be same.
The final sentence is the point: two passwords are one factor twice over, and provide no additional security against a stolen credential.
The mandatory baseline for all Internet based trading systems: (a) User Id (b) First Level password (c) Automatic expiry of passwords at the end of a reasonable duration (d) All transaction logs with proper audit facilities to be maintained in the system (e) Secured Socket Level Security for server access through Internet (f) Suitable Firewalls between trading set-up directly connected to an Exchange trading system and the Internet trading set-up.
Other IBT/STWT requirements: the broker shall capture the IP address from where the orders are originating · secure end-to-end encryption... through a Secure Standardized Protocol · a procedure of mutual authentication between the client and the broker server · in case of no activity by the client, the system should provide for automatic trading session logout · session login details should not be stored on the devices.
And a jurisdictional one: the broker's server routing orders to the exchange trading system shall be located in India.
Where this is taught
Free preparation for NISM Series VIIRelated terms
- Algorithmic tradingAny order generated by automated execution logic rather than typed in by a person — software that pushes buy and sell orders into the exchange once its parameters are met.
- Direct Market AccessA facility, introduced by SEBI in 2008 for institutional investors, that lets a client send orders straight into the exchange trading system through the broker's infrastructure without manual intervention by the broker.
- Internet Based TradingAn order-routing facility, approved exchange-by-exchange, letting a broker route client orders to the exchange trading system over the internet instead of only from an exchange-provided terminal.