Market regulator Securities and Exchange Board of India (Sebi) has started investigating last week’s technical glitches and trading halts at the National Stock Exchange of India (NSE) and the Multi Commodity Exchange Ltd (MCX), two people aware of the matter said.
“The regulator has sought a report from both the exchanges that have suffered technical glitches and trading halts for the second time within a year. Sebi will analyse the reports by the two exchanges and will respond in terms of corrective measures and actions," said one of the two people quoted above.
An email sent to a Sebi spokesperson was not answered.
NSE was forced to halt trading for around three hours at the start of 10 July last year because of technical issues. On Thursday, it’s Neat on Web (NOW) systems suffered a software shutdown during trading hours.
Normal trading was not disrupted as the members had alternative modes of connectivity during the disruptions.
A spokesperson for NSE said, “NOW is a shared CTCL system which had a temporary disruption and has been rectified on the same day and the system was up and running. NSE trading platform is completely different and functioned smoothly with full efficiency that day."
MCX suffered a trading halt in September last year and a repeat occurred on Friday when trading was halted twice. The first time, the systems halted for more than an hour at 7:12 pm and a second time at 10:11 pm. Normal trading resumed at 11 pm.
“Data integrity and other checks have been performed to satisfy and assure that there has been no impact on any of the surveillance, risk margining and any other pre or post-trade activities," said MCX but declined to comment on a specific query.
MCX’s preliminary analysis shows that there was some aberration in the low-level network layer but a detailed analysis of hardware and underlying operating systems is pending.
“It is the frequency of trading disruptions that is worrying. While Sebi typically has not penalised exchanges for trading disruptions, it cannot be ruled out if it causes any loss to market sanctity," said the second person quoted above.
“There is certainly a need to strengthen the monitoring system. Sebi will ensure that there is a proper monitoring of the technology being dispensed and that no investor is put at loss due to disruption," he said.
Due to malfunction at NOW, thousands of orders placed by hundreds of brokers were repeated by the system a number of times and in some cases, hundreds of times resulting into unintended trades for brokers/clients.
The Association of National Exchanges Members of India (ANMI) in a communication has even requested NSE for compensation as system fired multiple orders on its own, resulting in trades.
“It was not a breakdown of trading, rather a malfunction which resulted in firing of multiple orders resulting in trades from NSE’s NOW system," said ANMI in a communication to Sebi, a copy of which has been reviewed by Mint.
The Indian Council of Investors, an investor association, has also written to Sebi calling for unintended trades at NSE to be annulled.
“Brokers/investors should not be made to face the adverse consequences and financial loss resulting from this system malfunction of NOW," said the investor association in the letter.