GOVERNMENT OF INDIA
Ministry of Finance
DEPARTMENT OF ECONOMIC AFFAIRS
STARRED QUESTION NO. *393
TO BE ANSWERED ON THURSDAY, THE 20th December 2012/
AGRAHAYANA 29, 1934 (SAKA)
Erroneous Trading Cases in NSE
*393. Shri Rajeev Chandrasekhar:
Will the Minister of FINANCE be pleased to state:
(a) Whether Government is aware that there have been several cases of erroneous trading causing crashes, and subsequent trade halts in National Stock Exchanges (NSE), since March, 2012;
(b) If so, whether Government has initiated any enquiry to probe the technical issues leading to these trade halts;
(c) If so, the details of the findings and if not, the reasons therefor; and
(d) What steps are being taken by Securities and Exchange Board of India (SEBI) to secure the NSE system in order to prevent such errors in trade?
MINISTER OF THE MINISTRY OF FINANCE
(SHRI P. CHIDAMBARAM)
(a) to (d): A statement is placed on the table of the House.
Statement referred to in reply to Parts (a) to (d) of the Rajya Sabha Question No. *393 by Shri Rajeev Chandrasekhar regarding Erroneous trading cases in NSE due for answer on 20.12.2012
There has been one such instance since March 2012, which happened on October 05, 2012, when erroneous trading caused a crash and led to a brief halt in trading in the cash segment of the National Stock Exchanges of India limited (NSE) on account of the NIFTY circuit filter getting triggered.
The trading halt was on account of 59 erroneous orders by trading member that resulted in multiple trades for an aggregate value of over Rs. 650 Crore. As a result, the NIFTY fell to the day’s low of 4888.20 points, which was 899.40 points lower than its previous close of 5787.60 points.
NSE initiated action against the trading member for entering the erroneous orders on October 05, 2012 itself. Pursuant to the same, trading facility of the trading member was withdrawn for 3 days in all segments and a penalty of Rs. 25 Lakh was levied.
Pursuant to consultations with market participants, stock exchanges, the Risk Management Review Committee (RMRC) and the Technical Advisory Committee (TAC), Securities and Exchanges Board of India (SEBI) vide circular dated December 13, 2012 has implemented various pre-trade risk controls, such as order-level checks, dynamic price bands and risk reduction mode.