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Emkay Global Financial Services has asked the National Stock Exchange (NSE) to make available a regulatory show-cause notice that put some blame on the exchange for a flash crash in the market in October 2012.
The reply to the same is to be filed by August 26 and the brokerage’s next hearing in the Securities Appellate Tribunal (SAT) is set to take place on August 29.
The notice relates to the exchange’s role in the flash-crash of October 5, 2012, when a dealer at Emkay Global made a mistake while entering an order for one of its clients. NSE’s benchmark Nifty index, whose movements are said to be representative of the market, fell 900 points or over 15 per cent, temporarily wiping out Rs 3 lakh crore of investor wealth.
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The Nifty bounced back after a 15-minute stoppage of trade. The brokerage ended up with losses of Rs 51 crore. It subsequently asked the exchange to annul the trades, which was turned down by an NSE committee created to decide on the same.
Emkay subsequently appealed against the decision in the SAT. Even as the matter was set to be heard, reports emerged that the Securities and Exchange Board of India had sent a show cause notice to the exchange suggesting there may have been a failure of systems at the exchange as well. An NSE spokesperson had earlier said the exchange had replied to the same.
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The regulator is said to have asked for additional information on issues including why trading was not halted for an hour after the 10 per cent fall in the Nifty, as is required by protocol. The exchange is said to have replied that the decision to take a 15-minute halt as other exchanges and market segments were not affected and the fall was on account of a freak trade rather than a sustained fall backed by news events.
The counsel for the exchange said they would file a reply to the request for the show cause notice by August 26. Submissions by others who had been counter-parties to the October trades are also to be filed by the same day.
