Mumbai: Trading on the National Stock Exchange (NSE) was halted for almost three hours—the longest ever stoppage—on Monday because of a technical snag that disrupted buy and sell orders on India’s largest bourse by stock volumes.
The issue arose in the early hours of trading. Both NSE’s benchmark Nifty and BSE’s Sensex indices had risen to new records in opening trade when it was noticed that trades were not going through on NSE and price quotes were not moving in sync with those on the rival exchange.
“NSE cash market segment did not function normally due to a technical problem at the opening today and accordingly was closed," NSE said in a statement. It didn’t go into details of the technical glitch but clarified that the glitch was not the result of any cyber-attack attempt.
The derivatives segment was working normally and for sometime, trading on the futures and options segment continued even when trading on the underlying market was halted. But to ensure price parity, trading in the derivatives segment was also halted.
The bourse shut trading in both the cash and derivatives segments around 9.55am and said pre-market trading would resume at 10.45am. Technical issues persisted, forcing it to delay the restart to 11am before it finally reopened at 12.30pm. Members trading in the derivatives segment were given a window to cancel outstanding orders, from 12.15pm to 12.29pm.
NSE handles about twice the stock volume of rival BSE and controls about 80% of India’s derivatives market. Monday’s trading halt came in the walk of a probe into whether the exchange allowed some traders preferential access to its high-speed trading systems—an issue that may delay a proposed initial share sale by the bourse.
On Monday, while work was under way to restore normal trading, brokers questioned why trading had not started from NSE’s disaster recovery site in Chennai and the unusual time taken by the exchange to put together a cohesive response. The disaster recovery site is a replica of the primary site which ensures all exchange data is replicated on a real-time basis and which should start if trading is disrupted on the main segment.
“These are huge systems and things can go wrong; however, my biggest worry is why the trading was not resumed from disaster recovery site. Lakhs of traders are queued in and there is uncertainty," said Deena Mehta, managing director at Asit C. Mehta Investment Intermediates Ltd, a former director of rival exchange BSE.
NSE said the disaster recovery site is used only in instances of disaster and this was a software issue.
That “mechanism is normally invoked during any disaster, hardware failure, connectivity-related issues. Preliminary assessment indicated a software problem. Secondly, the system was expected to be rectified quickly and shifting BCP (business continuity plan or disaster recovery) site would have taken longer time," said the NSE statement. The exchange said it had referred the matter to its standing committee on technology, comprising public interest directors and technology experts, for reviewing the problem and approving measures to prevent its recurrence.
Market participants said the exchange could have handled the situation better.
“The exchange could have communicated it in a better way which would have helped the investor community," said Dipan Mehta, member, BSE & NSE.
Market regulator Securities and Exchange Board of India (Sebi) sought a detailed report on what lead to the technical snag, said the regulator. The report would also be sent to the finance ministry.
“Sebi has also asked NSE to have a review of their business continuity plans and to submit a detailed plan as to what measures are going to be taken to avoid such recurrences," the regulator said in a statement. “Sebi is also looking at the matter comprehensively and will interact with different stakeholders to explore as to what more needs to be done to avoid such recurrences."
The Nifty resumed trading at 9,727.65 points. Most sectoral indices traded higher with gains in the shares of public sector banks, IT and pharma firms. Nifty ended up 1.09% at a record 9,771.05.
Bloomberg contributed to this story.