NSE glitch: Unconvinced SEBI looks to penalise exchange

The Securities and Exchange Board of India (SEBI) is not convinced with National Stock Exchange's (NSE) reply on last month’s technical glitch, which occurred thrice in a span of 10 days. The market regulator is planning to penalise the exchange after deliberating on the issue with Technical Advisory Committee (TAC).

On September 13, NSE NOW, a trading terminal for traders, was not working properly in Gujarat, Rajasthan and in some parts of Maharashtra, prompting SEBI to slap a penalty of around Rs 50 lakh.

Ten days later, an issue was reported in opening trade itself, with the technical glitch lasting for almost 45 minutes. The same occurred during market close as well. The exchange settled trades taking the weighted average price of the previous 20 minutes prior to the technical glitch and attributed the same to an issue with one of its vendors.

NSE declined to comment on the subject.

The September 23 glitch assumes importance as it was the immediate trading session after Finance Minister Nirmala Sitharaman announced tax incentives to corporates on September 21 and volumes were high.

In a reply to SEBI, NSE placed the blame on Cisco, which provides a network between traders and exchange. The regulator has discussed this issue with TAC, a technology specialised committee. As the regulator was not convinced with the arguments put forth by NSE, it is now planning to take up this matter with TAC and is exploring the option of penalising the exchange.

"Earlier too, when SEBI banned participatory notes, the exchange faced a technical glitch in the very next session. A technical glitch creates panic between traders and creates huge suspicion in their minds. It also causes huge loss to investors due to the exchange’s failure. This is not acceptable," a source told Moneycontrol.

Sources said that as per the standard procedure, exchanges have to report all incidents in a prescribed format. A detailed root cause analysis (RCA) by the service provider vendor is the next step.

On the basis of this analysis, exchanges file a detailed report with the regulator.