Large Nifty futures trade creates flutter

An order of 800,000 units in Nifty futures triggers talk of a freak trade

A sizeable trade in the Nifty futures in the early part of Thursday’s trading, which was punched at levels way above the index levels, created a flutter on Dalal Street. The trade took the Nifty futures to 5,996 — 2.9 per cent up from the previous day’s close in a couple of minutes — when the index was at about 5,900, sparking speculation about the possibility of a freak trade.

Brokers said the order was about 800,000 units of the Nifty futures in the October series. A section of the market believes the trader could have erroneously punched the Nifty futures levels on the trading platform. The trade at higher levels triggered stop losses taking the Nifty futures close to 6,000, but the contracts returned to 5,900-odd levels soon. It, however, had little impact on S&P Nifty, which touched a high of 5,917.60 on Thursday. There was no trading halt, as the highs were well within the daily circuit filter limits.

Nifty October futures closed at 5,959, a premium to Nifty’s closing price of 5,909.70.

The identity of the brokerage from where the trade was executed could not be confirmed, but sources said it was a New Delhi-based firm.

A theory doing the rounds is that the trade might not be an erroneous trade, after all. Critics believe there could have been some manipulation.

“No brokerage firm or trading desk lets an order of the size of 800,000 units in Nifty futures be executed at one go. It is usually split into 6-7 orders. The question is how the system allowed such a large single order to go through,” said the managing director of a broking firm on condition of anonymity.

Sources said the brokerage which executed the trades has not made any request to cancel the trades. Last Thursday, when the September contracts were set to expire, the National Stock Exchange witnessed an erroneous trade in Nifty options, which had resulted in premiums plunging in the last couple of minutes of trade.

Both the trades did not have any cascading effect unlike what happened in an erroneous trade involving Emkay Global on October 5, 2012. However, the trade on Thursday involving Nifty futures would have led to some sharp moves if stop losses at the psychological level of 6,000 would have been triggered, said brokers.

Last year, NSE had shut its equity segment for two hours, when a fat finger trade caused a 900-point dive in the Nifty in two minutes, resulting in the index hitting the lower circuit filter.