Traders Applaud Ban on IVR-Led Order Confirmation, Citing Investor Protection

Market participants have responded positively to the National Stock Exchange’s (NSE) recent directive prohibiting order confirmations through interactive voice response (IVR) systems.

Sources informed Moneycontrol that the IVR-based confirmation system had the potential for misuse, allowing brokers and their agents to execute trades without explicit client consent. Additionally, it may have posed unnecessary obstacles for some investors, particularly those unfamiliar with the technology or the language in which prompts were delivered.

On March 13, NSE issued a circular barring the use of IVR for initiating or confirming orders. Brokers are required to comply with this directive by May 15, 2025.

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Risks of IVR-Based Order Confirmations

The circular stated, "It has been observed that certain trading members initiate buy/sell order(s) on behalf of clients and communicate via IVR (Interactive Voice Response) systems. Clients are then prompted to press a predefined number or option to confirm the order placement."

For instance, an IVR message might instruct a client:

• "Buy 50 shares of XYZ Ltd. at ₹200. To confirm, press 1."
• "Your account has a credit balance of ₹1,00,000. Press 1 to purchase Liquid Bees for the same amount."
   

While such automation may seem convenient, market insiders argue that it introduces serious risks. One key issue is the lack of an independently verifiable record of what the client actually selected. Since the entire process is controlled by the brokerage’s system, a dishonest broker could manipulate transactions by falsely recording a different selection than what the client intended.

A senior brokerage executive elaborated, "A broker could manipulate trade records by falsely claiming the client selected a different option. Since the system is controlled by the brokerage, verifying which number the client actually pressed becomes challenging. To eliminate such risks, brokers must now provide human-to-human voice recordings as confirmation for orders placed over phone calls, instead of relying on automated IVR systems."

Language Barriers and Accessibility Concerns

Another industry expert pointed out that brokerages with in-house research desks typically set up IVR systems, allowing clients to subscribe to trading alerts. These alerts can be delivered via email, SMS, app notifications, or IVR messages.

However, one of the major concerns with IVR confirmations is the potential language barrier. India is a linguistically diverse country, and stock market investors come from various regions with different native languages.

"For example, a Hindi-speaking client residing in Bengaluru may receive IVR messages in Kannada, based on their location. This could lead to confusion and impact their decision-making," explained the expert.

Investors who are unfamiliar with the language of the IVR prompts may end up making incorrect selections, potentially leading to unintended financial losses. This is particularly concerning for new or elderly investors who might not be well-versed in trading platforms and rely on voice confirmations for clarity.

The Need for Legally Verifiable Confirmation Methods

To prevent such issues, NSE has emphasized that order confirmations should be backed by verifiable evidence. The circular reiterated that brokers must use one of the following legally acceptable methods for order confirmation:

• Physical records signed by the client
• Telephone recordings of live conversations
• Emails from authorized client email addresses
• Logs of internet-based transactions
• Records of SMS confirmations
• Any other legally verifiable documentation

These measures ensure that there is a transparent and auditable trail of transactions, reducing the risk of disputes and unauthorized trading.

Market Reaction and Industry Adjustments

Market participants have largely welcomed this directive, viewing it as a step toward greater transparency and investor protection. Several brokerage firms are already adapting their systems to comply with the new requirements.

One brokerage official stated, "While IVR confirmations were initially introduced to streamline trading, their potential for misuse outweighs the convenience they offer. Moving to human-to-human voice confirmations or other verifiable records will enhance trust between brokers and clients."

Additionally, some experts believe that this move could encourage brokerages to further improve their digital interfaces and investor support systems. Many firms are expected to enhance their mobile trading apps, introduce multilingual support, and integrate AI-driven customer service to provide better assistance to investors.

The NSE’s directive to eliminate IVR-based order confirmations marks a significant move toward investor protection. By ensuring that trading confirmations are legally verifiable, the exchange is reducing the risk of unauthorized trades and fraudulent activities. While this may require brokerages to adjust their processes, it ultimately strengthens market integrity and enhances investor confidence.

As the May 15, 2025, compliance deadline approaches, market participants will closely watch how brokerages implement these changes and whether additional regulatory measures will be introduced to further safeguard investor interests.