Tech-glitch brings trading to a halt at NSE for four hours

Stock market trading was disrupted for nearly four hours on Wednesday after the National Stock Exchange (NSE) was hit by a technical snag. The NSE initially suspended trading in the derivatives segment at 11.40 a.m. but soon announced a complete halt to trading across the market, including cash equity and currency segments. This is the longest duration of trading halt ever in India. Subsequently, in another first, the NSE extended the trading hours beyond 3.30 p.m., up to 5 p.m.

Feeds come to a halt

Brokers told BusinessLine that they experienced issues with price feed of the Bank Nifty index at around 10 a.m. The Bank Nifty feed stopped in 30 minutes, and later they were not getting updated for the Nifty index, too. The BSE was not affected.

Brokers said that with 90 per cent of the trading volumes happening on the NSE, the market and its participants were badly affected. With more than ₹2-lakh crore worth of equity derivatives and cash trading taking place on the NSE daily, it claims to be the largest stock exchange in the world.

The NSE blamed the technical glitch on the leased lines provided by two telecom operators but did not name the service provider. But, when contacted by BusinessLine , Vodafone Idea and Reliance Jio denied any glitch in their networks. Airtel and Tata Communications refused to comment.

Why didn’t NSE switch to DR site?

Some brokers wondered why the NSE did not switch the trading to its disaster recovery (DR) site, per SEBI regulations, if there were problems at the BKC site. The DR site is a real time replication of the primary site, has all data available, and can come online with with near-zero time lag. It is designed for precisely such situations or emergencies.

Abhay Agarwal, Fund Manager, Piper Serica PMS and Piper Serica India Numero Uno Fund, said: “Absolutely shameful what is happening at NSE. Senior management should be held responsible for spoiling the reputation of our capital markets. I hope SEBI and FinMin take strong action.”

Root-cause analysis sought

Around 5.30 p.m., SEBI issued a statement saying it had asked the NSE to conduct a root-cause analysis of the “trading halt” and also explain the reasons for not migrating the trading to the disaster recovery site. The regulator has asked the NSE to submit its report at the earliest. A substantial rise in technical glitches, both at stock exchanges and with brokers, is forcing SEBI to look at framing new rules.

“SEBI is actively considering a proposal to introduce a framework for ascertaining the incidents of technical glitches where compensation needs to be paid to the investors and to devise a methodology and calculation of compensation,” the regulator had said in its annual report.

Glitches galore

The NSE has faced several trade glitches over the past 5-7 years, but no probe report or analysis of the events has been put out in the public domain by SEBI or the exchange. Rules are not yet in place for compensating investors for the loss due to the tech-glitches. In 2013, SEBI had blamed the NSE for a glitch that led to a 900-point fall in Nifty in minutes. The NSE blamed broker Emkay Global for it, but a SEBI investigation report said the NSE was responsible as its systems did not circumvent the error trade.

According to the brokers, the interoperability between the clearing arms of the NSE and the BSE, too, did not work on Wednesday. Interoperability allows brokers to execute trades not going through on one exchange at the other. Brokers said they had to place trades separately.

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