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Home >News >India >NSE glitch could not have been anticipated, says FM

Finance minister Nirmala Sitharaman on Monday said the technical glitch, which disrupted trading at the National Stock Exchange last week, was unintended and could not have been anticipated.

“Even where complete full-proof systems are laid, you find that in the NSE a couple of days ago when there was a glitch, kind of technology-driven glitch, which nobody intended or nobody could have anticipated it, but that glitch has cost us immensely and lessons are being learnt. Maybe that is an issue of interoperability between the two exchanges, but that is the kind of thing where seamless digital payments is the goal that we have to aspire for. That was also an example of how seamless payment modes on technology-driven platforms can face challenges," Sitharaman said at the 45th Civil Accounts Day organized by the Comptroller Auditor General of India (CAG).

A technical glitch at the NSE on 24 February led to a nearly four-hour trading disruption, resulting in losses for traders and investors. On Thursday, the NSE said it had to shut down temporarily due to telecom link failure leading to unavailability of the online risk management system. On Friday, the exchange said it has a strong technology governance process in place wherein the back-end infrastructure is reviewed on a regular basis by committees.

The Securities and Exchange Board of India (Sebi) has advised NSE to carry out a detailed analysis of the circumstances that led to the snag and asked why the trading could not be migrated to the disaster recovery site following the system failure. The finance ministry has also asked Sebi to submit a report after investigating the matter thoroughly. On 25 February, Sebi said it will take all necessary measures to ensure rectification of the reasons such as addressing institutional deficiencies.

The regulator said it has put in place a framework to deal with incidences of technical glitches at the market infrastructure institutions (MIIs) such as stock exchanges and clearing corporations. Sebi said MIIs will have to submit a detailed root-cause analysis within a time-bound manner after due vetting by the technology committee and governing board of the MIIs.

Brokers and market participants have condemned the way the NSE handled the crisis saying timely communication and clarification could have averted panic sell-off by online brokers on the BSE and prevented huge losses to investors.

The Association of National Stock Exchange Members of India (Anmi) has also blamed the NSE for losses caused to day traders due to the technical glitch at India’s largest stock exchange. In a letter to Sebi, Anmi said the NSE did not make any public announcements on the root cause and offer any solution.

“We believe that the exchange had knowledge of the situation at the initial trading hour when the position remained at peak level; however, no steps were taken to minimize the losses incurred by investors," it added.

NSE held leading market shares (by total turnover) of 93.31% in equity cash trading, 99.90% in equity derivatives trading, 59.73% in currency derivatives trading, 86.72% in interest rate derivatives trading and 90.69% in ETFs trading for fiscal 2020.

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