The payment of ₹100-150 crore, in the case involving a recent ‘fat finger’ trade in the derivatives segment of the National Stock Exchange (NSE), is likely to be delayed, sources said. Activity area.

The NSE is looking into the matter after stockbroker Vardhaman Global Sharecom wrote to market regulator SEBI and the NSE saying the shares were erroneous trades. Only three brokers, who are proprietary traders from Kolkata and Delhi, are said to have made profits of almost ₹105 crore on the trade and the remaining profits of ₹20 crore are widely distributed among the other brokers who handle the automated trade, the sources said.

The NSE has been taking a cautious stance on the matter since a 2013 SEBI investigation blamed the exchange’s risk management systems for failing to stop a market slide triggered by a similar ‘fat finger’ error. from Mumbai-based broker Emkay Global. In a notice published by BJ Dilip, then Deputy Managing Director of SEBI, it was revealed that the erroneous trades were due to NSE’s lax trading systems.

Risk management

SEBI was of the opinion that even if the brokers’ systems had failed, NSE’s risk management system should have been robust enough to verify the huge error. A trader from Emkay Global had placed a sell order for 17 lakh baskets of Nifty worth around ₹974 crore instead of hitting a regular sell order for ₹17 lakh worth Nifty. Emkay had suffered a loss of ₹51 crore on the trade. Later, when the case reached the Securities and Appellate Tribunal, Emkay got 50% of his money back.

In the latest incident, the NSE systems allowed options trades to be placed at 99.99% off the prevailing market price, with no significant movement in the index price. underlying. Since there is no circuit filter in the options segment or even a wide price range, the entire order from Vardhman Global worth ₹100-150 crore was filled. Also, it should be checked whether these were automated or manually performed transactions.

Exchanges around the world have experienced similar issues – for different reasons such as some algos going crazy, sometimes due to algos market manipulation or just a big trade. As in the case of Emkay, if this time too it was the failure of the exchange’s risk management system, which must also be investigated, payments could be delayed, an official said. of regulation. Activity area.

Published on

June 05, 2022