Securities pay-out in India’s stock market was disrupted on Monday since it was delayed by nearly four hours due to a technical glitch, sources told BusinessLine .
Pay-out is the trade settlement wherein brokers and their clients receive shares in their account by 1.30 pm daily. On Monday, pay-out of shares worth ₹10,000-15,000 crore was jammed for hours since stock exchange clearing corporations (CCs) released the trade files only at around 5.20 pm. Data servers at a leading CC went down, sources said.
Any pay-out delay makes it difficult for brokers and clients to settle their accounts or recoup margins for trading the next day. Since market regulator SEBI has tightened norms and forced clients to maintain margin at the peak rate, such delays can cause margin shortfall and is highly troublesome, brokers said. Markets were rife with speculation that IRCTC share split could have caused the glitch since the number of shares went up 5x. But a source close to leading CC said glitch was not due to IRCTC.
Most clients use shares as margin to trade. Shares credited in their account are further pledged by them the next day at around 9 am to fulfil margin requirements. Hence, delayed pay-out may lead to delayed pay-in the next day if any brokers fail to settle the client accounts in time and CCs do not reflect the updated margin. The National Clearing Corporation promoted by NSE and the Indian Clearing Corporation Limited of BSE settle almost 100 per cent trades between them. ICL has a major share since NSE is the leading exchange. Demat service providers NSDL and CDSL can update client accounts after they get the files from the two CCs. Each day there are two settlement cycles including cash market and derivatives. When contacted by BusinessLine , the CCs did not comment on the glitch
A recent SEBI directive says that top management of stock exchanges, CCs and demat providers will lose 10 percent of their salary due to disruption caused by malfunctioning hardware, software or any products and services provided them. If normal operations are not restored in 75 minutes, except during disaster, then the concerned institution has to pay ₹50 lakh in penalty and if the disruption extends beyond three hours, the penalty is ₹1 crore.
Root cause analysis
A root cause analysis report, outlining the reasons for the glitch has to be submitted to SEBI within 21 days of the incident.
The institutions will have to pay ₹1 lakh per day in case of delayed or incomplete submission of this report and ₹2 lakh per day for failure to address the glitch for the first 15 days and ₹3 lakh and ₹25 lakh for the next 15 days thereon.