SEBI lays down SOP for stock exchange outages

The Securities and Exchange Board of India (SEBI) in a circular has chalked out a Standard Operating Procedure (SOP) that will come into play during a stock exchange outage. The stock exchange outage, as defined by the circular, means a stoppage of continuous trading on the exchange and is wide enough to include technical disruptions and stoppage of trading by the exchange itself or for reasons beyond the control of the exchange.

The exchange has been given a 15-minute time window to inform market participants, trading members and other MIIs about the outage. The circular mandates that the exchange will have to inform the regulator “immediately”.

In case of disruption of trading in one or more affected segments qualifying as an outage, trading shall continue in all the other unaffected segments, and all the other unaffected exchanges shall continue to trade in all of their market segments.

The affected exchange will be required to give a 15-minute advanced intimation to all the market participants before the resumption of trading, and a pre-opening session similar to the normal pre-opening session will be conducted to arrive at effective price discovery.

The circular draws out a number of scenarios in which trading hours might or might not be extended:

A. If the trading on the affected stock exchange returns to normalcy at least one hour before the normal closure, then, the trading hours would remain unchanged.

B. If the trading on the affected stock exchange does not return to normalcy, one hour before the market closure, trading hours for all exchanges would be extended by one and a half hours for that day. It is incumbent on the exchange to inform market participants, MII and SEBI about the extension of trading hours latest by one hour and fifteen minutes before the normal closure.

C. If the affected exchange is not capable of resolving its disruption, 45 minutes after normal market closure, then no trading is to happen on the affected stock exchange for the day. However, other unaffected exchanges would continue to operate for an extended time, in order to facilitate smooth closure and settlement of intraday operations.

D. If the outage occurs during the last trading hour and 15 minutes before the scheduled closure, trading hours for all exchanges would be extended by one and a half hours.

An extension of trading hours in the cash market would be applicable to the extension of trading hours in the equity derivatives market as well. Additionally, an extension of trading hours in the cash market will also be applicable to secondary market mechanisms like buybacks and offer for sale etc.