Zerodha's sensex expiry issue in June and July 2023

Hey Bhargav,

It’s hard to deduce & easier to make assumptions without having complete knowledge of the incident that has occurred and the subsequent follow ups made. The order that has been shared is a GRC order for an issue that occurred on 07th July 2023. Let me attempt to explain so there’s clarity for everyone to understand the situation correctly.

It’s true that we did have an issue on the 30th of June for BFO orders. The issue lasted for 14 minutes between 3:08 and 3:22 pm affecting a smaller set of users. Users were unable to place, modify or cancel their orders in this 14 minute period after which things resumed to normal.

On the same day evening, when we reached out to our technology vendor, Refinitiv, we were informed that this disconnection happened due to a network connectivity issue in the line connected between the Stock Exchange and our OMS/RMS systems. There are P2P leased lines connected between the Stock Exchange & the broker OMS systems and these lines were flapping on account of which the issue had occurred. Despite this, on the same day, we reached out to the Stock exchange and asked them to increase the bandwidth capacity on all our lines to eliminate any possibility of bandwidth-related disruptions leading to the primary disconnection, which eventually happened only on July 12, 2023.

I do not want to sound confrontational or indulge in mud slinging, but were we informed by the MII that there was a bandwidth issue on 30th June? The simple answer is ‘no’. Matter of fact, till date, there isn’t a system for members to proactively track bandwidth utilization during the day. It was only on July 21, 2023, 14 days after the bigger issue of 07th July, that the stock exchange issued a circular that they would be sending reports via email to trading members notifying them of the bandwidth utilization.

My colleague, who is also the compliance officer at Zerodha, was a party to the meeting representing Zerodha in the said matter. In the presence of the panel member, no such claim of having informed Zerodha of the bandwidth utilization was made by any officials of the Stock Exchange. Adding the line “As per exchange officials’ alerts were sent to them on 70% utilization, still no corrective actions were taken by the Trading Member” in the GRC order was a blatant mistake which we’d missed to spot, which we’ve now brought to the Stock Exchange’s notice for them to act upon. If we’re able to obtain a copy of the corrected order, we’ll make it a point to share it here concealing all other client details, if any.

Trading on the BFO segment has picked up in the recent past. While on the face of it, 4MBPS seems less in today’s world, we’ll need to understand the nuances between a P2P line and a broadband line. A private leased line to an exchange (of which several are pulled by brokers to the same exchange) cannot be compared with a home broadband line in terms of “Mbps”. These leased lines are very contextual and only transmit compressed exchange protocol messages, which typically only come up to a couple of hundred BYTES. Typically at any given moment, only a small percentage of such a dedicated leased line is utilized.

To substantiate, here’s a link to a NSE circular: https://nsearchives.nseindia.com/content/circulars/MSD55333.pdf on market data. Although this only talks about broadcast and not interactive (the one used to send orders and receive confirmation), everything that is broadcast by the Stock Exchange (feeds, 5 depths, market open/close status) only consumes 600 Kbps in the Cash market segment.

Further, on 26th July, 2023, when we finally received our Bandwidth utilization report for 30th June, none of the reports indicated any excess utilization. I’ve attached the Bandwidth graphs from one of the silos here indicating the utilization:

As is seen in the above charts, the bandwidth utilization was lower than 2MBPS. This means that the issue of 30th June, cannot be attributed to bandwidth utilization as has wrongly been claimed by the Stock exchange. The fact that we were running a 4MBPS leased line is not a “discovery” or a “revelation” through the GRC order. We’re among the only brokers today that has a dedicated section on its website where a root cause summary of all technical glitches are shared with the public for transparency. Even for the issue of 30th June, the RCA that was put up on the website, the report did indicate that we were running a 4MBPS Leased line and had requested for an upgrade. Also, it’s not true that Zerodha hasn’t refunded losses, wherever the claims are legitimate, the team has been given a mandate to assess and refund losses suitably.

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