An over-400 point loss in the near-month Nifty index futures on Tuesday led to market rumours of a fat finger trade (an erroneous trade order) in the segment. The January futures index, which opened at 8,422, fell to 8,000 points soon after market opening, falling below the underlying Nifty index.
The futures index recovered during trade on Tuesday to close at 8,150.30, comfortably above the spot Nifty’s close at 8,127.35.
Sources said the sudden slump in the futures index was because of a sell order executed during the market’s pre-open session and an illiquid futures order book.
A spokesperson at the NSE, however, clarified that the exchange has not received any complaints regarding any erroneous order and that all trades happened within the reference price range for the Nifty Futures.
It may be recalled that in October 2012 a series of erroneous orders placed by broking firm Emkay Global Financial Services sent the NSE’s Nifty crashing, which signalled the vulnerability of trading systems to glitches. Following the episode, market regulator SEBI, after special purpose inspection, directed the NSE in October 2014 to carry out a comprehensive review of the bourse’s systems and processes by an independent expert.
In the same order, SEBI, while acknowledging the steps taken by the exchange to prevent such occurrences, emphasised “the need to take a holistic, comprehensive review and create robust systems”.
According to NSE website, the risk containment measures include capital adequacy requirements of members, monitoring of member performance and track record, stringent margin requirements, position limits based on capital, online monitoring of member positions and automatic disablement from trading when limits are breached.