The Hindu Business Line : Snag in BSE circuit filter pinches retail traders

Mumbai, July 2 A technical snag at Bombay Stock Exchange led to several shares surging beyond their circuit limits on Thursday, leading to a lot of confusion among investors, particularly retail investors.

Hundreds of shares surged more than 20 per cent circuit limits even when they were in the trade-for-trade segment. In this segment, buy and sell transactions for the same shares have to be executed separately (one cannot buy 1,000 shares of a stock at Rs 25 each and sell 1,000 of the same shares at Rs 30 each and pocket the difference, each of these actions has to be completed separately).

According to the circuit summary on the BSE Web site, a total of 374 shares were locked in the upper circuit on Thursday. Out of this, 177 were from the B Group of shares and 132 from the T Group of stocks.

Many shares had run up as much as 30 per cent since the circuit filter did not kick in because of the technical snag. By 2 p.m. BSE announced that the circuit filter had been changed to 5 per cent on several of the runaway stocks.

Brokers said during this period they were inundated with calls from confused clients. “They were enquiring about what had happened, mainly wanting to know if their trades will be cancelled,” said a director of a brokerage.

The investors’ main worry was what would happen to those trades that had been made when the share prices had run up to 30 per cent, now that the circuit had been revised down to 5 per cent.

A BSE spokesperson said that a technical error had resulted in the glitch and that none of the trades that had been made would be cancelled.

Some shares that rose due to the non-application of circuit filter were JK Synthetics, SWAN Mills, Assam Company, CCL Products, Atlanta, Resurgere Mines, Ontrack and RTS Power Corporation.

There were rumours that many large bulk deals had taken place and that BSE had cancelled them after the revision of the circuit filter. The BSE spokesperson denied cancellation of any bulk deals during the day.

Some brokers said the matter should be taken up by SEBI as this sort of a glitch would cost investors huge amounts of money. “The markets regulator has to take this issue seriously because when the investor or trader makes even a small mistake, they interpret it as being intentional and levy a penalty. How can BSE justify that this was a technical error only? They need to cancel all the transactions which were beyond the circuit price; then only they can claim that it was a technical fault which was rectified,” said Mr Kishore Ostwal, Chairman and Managing Director at CNI Research.

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