NSE glitch: Sebi forms panel to strengthen interoperability

SEBI headquarters

The Securities and Exchange Board of India (Sebi) held a meeting of stock exchanges and clearing corporations on March 1 to discuss measures to strengthen the interoperability mechanism, which many market participants said had collapsed last week.

Many market participants had complained that when technical issues stopped trading operations at NSE last week, the exchange’s clearing corporation also had a glitch, which prevented them from shifting to BSE’s systems using interoperability.

“Sebi has held the meeting to discuss possible resolutions to handle situations similar to the ones that occurred last week where exchange and clearing corporation operations were halted due to some technical reasons hence interoperability was also not working,” a source at an exchange invited for the meeting told Moneycontrol. He said the regulator had called a virtual meeting.

Sebi may work towards creating a common data pool for all clearing corporations to help the market operate smoothly if such a situation arises again, the source said.

According to sources, the regulator has formed a committee that includes stock exchanges, clearing corporations and depositaries officials to boost interoperability. The panel is expected to submit its report by June.

In 2018, when interoperability was implemented, nobody anticipated the unprecedented situation of an exchange and its clearing corporation not functioning at the same time. When this happened last week, other clearing corporations were unable to get information about clients.

Another source told Moneycontrol Sebi may create a data pool of trading members which would be visible to all clearing corporations. “In case trading halts at one exchange then square-off is possible on other clearing corporations with the help of this common pool data. In this common data pool information about member margin status and position limit will be shown to all clearing corporations. So, it will be easy for the other clearing corporation at time of squaring off the position. However, currently it takes a day time for shifting one clearing corporation to other clearing corporation”.

A senior exchange official told Moneycontrol that the regulator was also considering limits on equity holding on clearing corporations. “When the regulator is planning de-centralising every business from the exchange business, then why not in clearing corporations also. Earlier Sebi has capped on stake in depositories now they have issued to consultation paper for relaxing shareholding norms for depositaries”.

Sebi did not respond to queries from Moneycontrol.

Last Thursday, trading in NSE halted for four hours, Sebi said in a press release that interoperability helped market participants continue their transactions at other exchanges, which the regulators. “The same is evident from the fact that the trading turnover at BSE in equity segment jumped to Rs. 40,600 crore on February 24,2021 as compared to an average daily trading turnover of approximately Rs. 5,200 crore during the previous 30 days,” the regulator's statement said.

However, NSE mentioned in its press release that clearing corporation was impacted “The instability of telecom links resulted in an impact to the online risk management system of NSE Clearing and other systems”.  Due to unavailability of interoperability they were unable to square off their position in the other exchange.