NSE, BSE will act as alternative trading venues for each other from April 1, 2025, says SEBI

SEBI issues circular on business continuity for interoperable segments of stock exchanges

Market regulator Securities and Exchange Board of India (SEBI) on November 28 mandated that the two leading exchanges NSE and BSE act as an alternative trading venue for each other, through a circular issued to ensure business continuity.

The directions of the circular is to come into effect from April 1, 2025.

"Upon discussion with exchanges, it has been decided that to begin with, NSE would act as an alternative trading venue for BSE and vice-a-versa. Both exchanges would prepare a joint SOP that would include plan to be invoked at the time of outage on one exchange along with flow of activity involving the affected exchange and its alternative trading venue and roles/responsibility of each of them," said SEBI.

SOP should be submitted to SEBI within 60 days from the date of the circular, said SEBI.

The regulator also issued directions for the interoperable segments of the exchanges, which include cash market, equity derivatives, currency derivatives and interest rate derivatives.

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1.Common scrips, derivatives on single stocks or correlated indices, currency derivatives segment and interest rate derivatives:
If identical or correlated trading products are available on another trading venue, then participants can hedge their open positions by taking offsetting positions in identical or correlated indices on other exchange. Further, as these segments are interoperable, taking offsetting positions in other trading venue would net off such open positions for end clients and release the margin. Hence, no separate treatment is required for such category of products.

2.Scrips exclusively listed on an exchange:
To ensure continuity, exchanges may create reserve contracts for scrips (i.e. exclusively listed scrips on other exchange) and single stock derivatives not traded on their exchange (and available on other exchange), to be invoked at the time of outage on the other exchange.

3.. Index derivatives products not having correlated index derivatives products on another exchange:
Exchange which does not have a highly correlated index derivatives product with one available on other exchange may consider creating such an index and introducing derivatives contracts on it, in line with extant Regulatory provisions. The aforesaid would provide an avenue to hedge positions in index derivatives products of an exchange that suffered an outage.

An affected exchange has also been asked to inform the other exchange and the regulator about the initiation of the business continuity mechanism, when a glitch occurs, within 75 minutes of the impact.