What was the issue that caused NSE to stop trading in both Cash and F&O segment? Why didn’t NSE Chennai disaster management setup take over if there was an issue in the primary.
If someone Bombed / Earth quake at NSE mumbai, they will take a flight to Chennai and switch on the power to server. Since there is no disaster happened today, so it did not need to activate. They say every thing is working fine only display problem. They are asking you to Drive during Night without Head Lamps.
Spot and Futures are moving in opposite directions and still it is not an issue for NSE. Nothing will happen to NSE or SEBI. Risk is only for market participants.
NSE has just put out this circular
NSE cash market segment did not function normally due to technical problem at the opening
today and accordingly was closed. F&O and CDS market segments opened normally.
Subsequently after giving notice to the market, the F&O segment was also closed. Two
attempts to reopen the market were not fully successful and finally at the third attempt the
market was opened at 12.30 pm in the cash and F&O segments, after the pre-open period. The
currency derivative segment was functioning normally.
NSE deeply apologises for the glitch. The matter is being examined by the internal technical
team and external vendors, to analyse and identify the cause which led to the issue and to
suggest solutions to prevent recurrence. The matter has been referred to the Standing
Committee on Technology, comprising of public interest directors and technology experts for
review of the problem and to approve measures to prevent recurrence of such glitches.
Running a brokerage and going through similar issues (although at a much smaller scale), I can fathom a guess on what could have possibly gone wrong. It was a technical glitch with the broadcast because of which market depth was not getting populated correctly when the pre-open started at 9 am. The first 7 minutes of the pre-market is for order collection and building a book, I am guessing that process itself would have crashed because of the broadcast glitch.
At 9.15 am, F&O trading started normally, Currency trading normally, limit orders on equity trades were going through normally, but the market depth wasn’t updating correctly as shown below. Since bid/asks were wrong, market orders on equity wasn’t going through on the exchange. Around 9.24 AM all equity orders stopped going through.
F&O is a derivative of the underlying stocks. We can’t have F&O trade when underlying stocks weren’t trading properly. So I am guessing exchange stopped feeds and stopped trading on both equity and F&O at 9.55 AM.
At this point, exchange would have had an option to switch to disaster site or try to find a fix and continue in the primary. Even though many people think switching to disaster should have been done, it is not an easy decision. If the exchanges were down completely, disaster would have been the only way. But since the issue was in only equity and not with F&O/Currency, I am guessing they would have tried to fix this issue first. Switching to a disaster site in the middle of day potentially could have caused a lot more chaos. F&O trades much higher and risk associated is much more than equity.
Three attempts were then made to restart for the day. At 10.30 AM, 11.15 AM, and finally at 12.30 PM started working again. Even though trading started, the market depth issue got fixed only around 2 pm. Since they restarted the equity bit, all pending equity orders from morning were lapsed/cancelled by the exchange at around 12.30 pm.
This is just my guess of what potentially could have happened today. Exchanges are like any other technology business, they are bound to have glitches once in a while. Even the largest exchanges from the most developed markets have had them. I hope like the press release says, exchange takes steps to make sure this doesn’t repeat.
Do read this bloomberg article.
At 9:20am equity trading stopped or not working.
for what reason they allowed trading in FnO till 9:55am ?
Is it correct to allow trading in FnO without spot working?
Probing FnO trades till 9:55 will bring the truth
Nice thoughts out Nithin.
NSE has not learnt anything frm the October 2012 fiasco. During tht time also, they didnot instantly close the market on circuit down. They allowed it to move down some more % for few minutes. Today also they took about 5+40 mins to close the market and tht too, I think to avoid any mishaps in ‘AU Small Finance Ltd’ listing at 10 AM! Otherwise they wud hv merrily continued with it!!!