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SEBI’s Technical Advisory Committee (TAC) has observed that NOW (NEAT on Web), a trading software operated by NSE's subsidiary, that had witnessed a ‘tech glitch’ on May 24, had instead of replicating the trade orders, multiplied them, following a system re-boot, sources told BusinessLine . The committee submitted its report earlier this month.
Tech providers rapped
The TAC’s main finding was that a software glitch had hit NOW. Reprimanding the providers of the software, it asked them to report back on the issue.
The NOW platform, operated by NSE subsidiary NSE Data & Analytics Ltd (earlier known as Dotex), is an alternative front-end application through which brokers can connect to the exchange to place their orders. Brokers can choose which front-end application to use.
The NOW application is licensed by Thomson Reuters to NSE Data. While the hardware and the data centre are maintained by NSE Data, the application software and operations support for NOW are provided by Thomson Reuters.
According to letters written by brokers to the Association of National Exchanges Members of India (ANMI) and other organisations, and viewed by BusinessLine , the traded quantity on May 24 overshot by nearly 100 times in some cases due to a bug in the software and exceeded the risk and exposure limits of clients.
Shock and surprise
“Orders placed in the NOW system by our dealers were displayed as rejected, but to our shock and surprise, the end-of-the-day file received from the exchange showed 4,200 Nifty call options were executed by the NOW software against our input order of 525,” said a letter from an NSE broker, who largely caters to retail clients.
Another letter said: “At 11:29 am on May 24, a single order placed via NOW was executed multiple times and there was no option to stop it. After a halt, when NOW was re-started at around 2:45 pm, we tried squaring up some of our positions but the software automatically executed more trades. At 3:30 pm (end of trading day) there were still more orders pending.”
Most large brokers have their own trading forms to connect to the NSE; it is the small ones catering to retail clients who use NOW.
‘No impact on NSE system’
An NSE spokesperson said in a response to BusinessLine ’s email query: “The incident on May 24, 2018, is pertaining to the NOW application and not the Trading System & Clearing Systems of NSE.”
“The NOW application is disparate from the trading system and it has no direct impact on the functioning of NSE’s trading system and connects like all other front-end applications from the broking entities.”
“During the disruption, the members were able to connect to the exchange through the other front-end applications. NSE Data had reported the incident in the NOW application to SEBI...We are unaware of the SEBI TAC related report submitted in the matter.
“Have spoken to SEBI on this and put in adequate steps to ensure that this problem is not repeated,” the spokesperson said.
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