Sebi, Finmin seek detailed report from NSE as trading halts due to glitch

The issue came to light less than an hour after normal trading had commenced, with several brokers complaining of freezing of live price feeds

The National Stock Exchange (NSE) on Wednesday suspended trading in its cash and derivatives segments for over three hours—one of its worst-ever outage—jeopardising the interests of several market participants. The exchange cited issues with its telecom service providers that prevented stocks and index quotations from getting updated. The issue came to light less than an hour after normal trading commenced, with several brokers complaining that live price feeds had frozen.

At 11.40 am, the exchange halted equity market trading, forcing investors to redirect their cash market trades to the BSE—where “impact costs” are typically high due to shallow trading volumes.

“NSE has multiple telecom links with two service providers to ensure redundancy, and we have received communication from both the telecom service providers that there are issues with their links due to which there is an impact on the NSE system," the exchange said, without disclosing the names of the service providers.

Sources said Airtel and Tata Communications are among the NSE’s service providers. The companies have provided fibre cables and enterprise-grade bandwidth to the stock exchange. "We are awaiting root-cause analysis report from NSE. We will be able to share further comment only after studying it," said a source from Airtel.

With no communication from NSE on trade resumption even as the normal closing time of 3.30 pm approached, several brokers started cancelling open orders in the system and decided to square off intra-day cash market positions on the BSE.

This lead to distortion in several stocks prices, with shares of HDFC Bank and Tata Consultancy Services (TCS) witnessing an unusual drop on the BSE.

Less than 15 minutes before close, NSE and BSE announced they were extending trading hours from 3:45 pm to 5 pm.

Several market players slammed NSE for the last-minute announcement. However, sources said regulatory approvals for extending trading hours took time.

 Both the finance ministry and the Securities and Exchange Board of India (Sebi) sought a detailed report from the NSE as trading was halted for several hours.

“Sebi has advised NSE to carry out a detailed root-cause analysis of the ‘trading halt’ witnessed today and also explain the reasons for trading not migrating to the DR site,” said the market regulator.

NSE enjoys a virtual monopoly in the futures and options (F&O) segment and has over 90 per cent market share in the cash market. As a result, many participants, especially in the F&O space, had no choice but to wait for trading to resume.

The exchange didn’t respond to queries on why the disaster recovery (DR) site wasn’t activated or why it took several hours to resolve the issue.

A senior finance ministry official said: “We are looking at the severity of the issue and whether any consequential damage occurred due to this. We are also seeking details on instances of past glitches and remedial measures taken by the exchange.”

Sources said an interim report would be submitted to the ministry and Sebi within 24 hours. A root-cause analysis could take a week.

The NSE reported a trading turnover of Rs 45,837 crore and Rs 30.6 trillion in the cash and derivatives segments, respectively. The volumes were lower than the February average of Rs 79,302 crore and Rs 41.3 trillion, respectively. The BSE, on the other hand, recorded volumes of Rs 40,698 crore and Rs 3.1 trillion in the cash and derivatives segments. The volumes were above this month’s average of Rs 7,282 crore and Rs 2.9 trillion. However, nearly Rs 29,400 crore of the cash market volumes on Wednesday on the BSE were on account of a share sale in Bosch. NSE holds the record for being the world’s largest derivatives exchange in terms of number of contracts traded. 

Trading glitches are not uncommon both in India and globally. In November, the Australian Securities Exchange had to halt trading for 20 minutes due to software issues. In October, the Tokyo Stock Exchange halted trading for an entire day due to a hardware failure. In June, an erroneous price feeds for certain F&O contracts had disrupted trading on NSE.

However, the outage on Wednesday brought back memories of 2017, when the NSE had to halt trading for three hours as quotations stopped updating.

Several such outages have prompted Sebi to device a methodology for compensating investors who suffer because of technical glitches.

According to the regulator's annual report for 2019-20, it 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.