Investor Issues
NSE not accepting “systems failure” for Friday’s fiasco

While the NSE claims to have “attained nirvana” in technology, brokers are being penalised for an error that should have been spotted and rectified or rejected by the ‘robust’ systems at the exchange

 
The National Stock Exchange (NSE) is blaming brokerage firm Emkay Shares & Stock Brokers for triggering circuit breakers but is far from admitting error in its systems. Last Friday the Nifty fell sharply by about 800 points or 16% to a low of 4,997.6 during the morning trading, which was blamed on 59 erroneous trading orders placed by Emkay. However, this is not the first time the so-called ‘robust’ systems at NSE have malfunctioned. 
 
As usual, both NSE and market regulator Securities and Exchange Board of India (SEBI) have ordered probes into this incident. However, there is no word on previous such probes in freak trade halts on the NSE. 
 
It has been found, time and again, that the ‘robust’ systems at NSE are in fact vulnerable to trading errors. The freak trade halt on NSE on Friday was fourth such incident since March this year. Brokers and traders are unhappy with increasing frequency of trading halts at NSE due to “system malfunction” or “technical glitch”. They also allege that they are being penalised in case their end of the day client positions exceeds the limits due to this technical error. 
 
 The auction for sale of government’s 5% stake in ONGC on 1 March 2012 turned out to be a complete fiasco and in the end the Life Insurance Corporation of India (LIC) had to save the day by subscribing for over 25% of the shares. Complete mismanagement of the bidding process by the two stock exchanges, NSE and BSE was blamed by market intermediaries for the disinvestment auction fiasco, where subscription had to be managed in a hurry towards the end of trading.
•  Later on 20th April, Nifty futures dropped by as much as 6.7% in the afternoon trade which dragged down spot indices. That time also while NSE officials denied any technical error, several brokers said the halt was due to a trading mistake caused by an attempt to sell both Infosys futures and Nifty futures at the same time. In other words, both trades were sold at the best available selling price at a time when the order book was shallow. Following the suspected erroneous trading, Nifty futures tumbled by 6.7% while Nifty and Sensex also fell by over 1.5% each.
 Next month, on 14th May, another technical glitch in NSE’s derivatives trading system brought afternoon trade in index futures to near halt. According to dealers, the malfunction began at around 1.15pm and went on till market close. In a release, the NSE had said, “An erroneous order cancellation request was received by the trading system today which disrupted the execution process. Concurrently, there was a malfunction in the network layer. These led to the interruptions in the derivative trading system. It was therefore, required to start the process on the contingency machine for the market to function. The contingency machine was pressed into service in a short span of time and matching continued.” 
•  Last Friday at 9.50am, the Nifty circuit filter got triggered which immediately closed the cash market. The fall in the Nifty was apparently due to abnormal orders resulting in multiple trades at low prices. “While the exchange systems functioned normally without any glitch, the above abnormal trades caused market closure automatically due to the index circuit filter getting triggered,” NSE said in a release.
 
All these technical glitches are happening when NSE has been claiming to have “attained nirvana” in technology. Ravi Apte, chief technology officer of NSE, while speaking to Business Standard, had said, “Trading speed on NSE is close to the speed of light. And this is the limit”. 
 
However, systems at NSE allow anyone to punch orders exceeding his margin limits, alleged one of the traders. According to the trader, one of his dealers punched in a trade for 10,000 lots in the US dollar in the currency derivatives segment on the NSE, instead of 10,000 quantity (or 10 lots). At that time the trader had a currency limit of Rs6.83 lakh with his clearing member. This means, even though the dealer had punched in a wrong trade, it should have been automatically cancelled due to unavailability of sufficient margin. Instead the systems at NSE accepted the order resulting in a mark-to-market (MTM) loss of Rs20 lakh to the trader. He was also slapped a penalty of Rs1 lakh by NSE.
 
In an email reply, the NSE, reiterated that there was no system error or glitch. "The trader placed the order at 16.58 hours, which is close to market closing hours i.e. 1700 hours. In the given case, the trading member (TM) placed an erroneous order for 10000 lots and trades were executed substantially and margins were applied and the member was immediately disabled from trading any further," the Exchange said.
 
“On one hand NSE and SEBI are taking steps to increase market penetration at semi-urban and rural areas, while on the other hand they are penalising and also slapping suspension notices on traders for a human error, which could have been automatically rectified at NSE’s end,” the trader said.
 

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COMMENTS

sachchidanand

5 years ago

I remember the very reason for floating NSE by Institutions , was to reduce dominance of Stock markets by BSE . BSE was " For Brokers, Of brokers & By Brokers" and nicknamed Brokers Stock Exchnage. NSE initially did good work but my experience with Arbitration mechanism of NSE has brought out the fact that NSE is not taking care of Investors interest but Brokers forum to fleece Investors. I and my friends were a victim of unauthorised trades by Brokers. We approached NSE for redressal. Arbitration Committes of NSE were found to be manned by persons with not even cursory knowledge of stock exchanges. They passed orders in favour of Brokers , leaving no other way but to approach Courts. My case is pending for last six years in Court , where Brokers have unlimited resources to seek adjournments . Thus NSE has failed in its duty towards Investors. NSE needs to be probed. Stock Exchnages appear to be outside RTI , so one cannot obtain information about Brokers who continue to defraud Investors by indulging in Unauthorised trades.

Vaibhav Dhoka

5 years ago

Here culprit and judge are hand in glow.Therefore SEBI will just blink but will not take action on NSE.

REPLY

sachchidanand

In Reply to Vaibhav Dhoka 5 years ago

Refusal by SEBI to act against market intermediaries , clearly shows some hand-in-glove arrangement between them

V GANESAN

5 years ago

It is clear case of manipulation by somebody to create panic among investors.I have never seen multiple heavyweight companies are placed as freak trades.It is very clear that the intention of the organization is to create panic and to bring down the market.How can a concentrated orders placed of multiple companies without the knowledge.Both NSE and SEBI should tell the truth and punish severly.

REPLY

sachchidanand

In Reply to V GANESAN 5 years ago

SEBI & NSE HAVE ALREADY PUNISHED SEVERELY .. NOT PERPETRATORS BUT INVESTORS !

sachchidanand

In Reply to V GANESAN 5 years ago

this is just wishful thinking. SEBI needs to be scrapped altogether , if they do not improve corporate governance

Gopinath Prabhu

5 years ago

I think the light he mentioned was Tubelight, which went off at 9.50 on 5th October. If he meant sunlight, it goes down in the evening and if he meant power, Indian Power situation is for all to see

Sensex, Nifty in a short downtrend: Monday Closing Report

The recent strong uptrend is over and the market is likely to remain in a downtrend, subject to pullbacks for the next few days at least



The market settled lower for the second day in a row on profit booking and weak global cues. On Friday we had mentioned that a close below 5,735 on the Nifty may result in some change in trend. Although the index began above this level today, it witnessed a continuous fall throughout the trading session. The recent uptrend is over for now and a short-term downtrend has set in. The National Stock Exchange saw a volume of 71.19 crore shares and an advance-decline ratio of 618:824.
 
The Indian market opened marginally higher as the weakness in the Asian pack made investors nervous about the global slowdown and the September quarter earnings season. The Nifty opened five points up at 5,752 and the Sensex started off at 18,969, a gain of 31 points over its previous close.
 
The opening figures on both benchmarks were their intraday highs as the market soon fell into the negative on profit booking after the rally seen last week. The market continued to drift further southwards as trade progressed on selling pressure in realty and oil & gas sectors.
 
A weak opening of the key European indices added to the woes, which pushed the barometers deeper into the red. Select buying saw the market make a brief recovery in post-noon trade, however, unabated selling pressure kept a tab on the gains.
 
The market dropped to its intraday low in the last half hour wherein the Nifty fell to 5,666 and the Sensex retracted to 18,684. 
 
The benchmarks settled near the lows on profit booking and weak global cues. The Nifty declined 71 points (1.23%) to close at 5,676 and the Sensex tanked 229 points (1.21%) to finish the session at 18,709.
 
Among the broader markets, the BSE Mid-cap index declined 0.44% and the BSE Small-cap index fell 0.16%. 
 
BSE Healthcare (up 1.20%) was the lone gainer in the sectoral space. The losers were led by BSE Realty (down 3.50%), BSE Oil & Gas (down 2.77%); BSE Capital Goods (down 2.70%); BSE Consumer Durables (down 1.56%) and BSE IT (down 1.40%).
 
Eight of the 30 stocks on the Sensex closed in the positive. The major gainers were Sun Pharma (up 3.67%); Bharti Airtel (up 1.62%); Cipla (up 0.87%); Jindal Steel (up 0.87%) and ITC (up 0.65%). The main losers were Reliance Industries (down 4.51%); Hindalco Industries (down 3.52%); BHEL (down 3.44%); Larsen & Toubro (down 3.09%) and State Bank of India (down 2.97%).
 
The top two A Group gainers on the BSE were—NHPC (up 3.97%) and Sun Pharma (up 3.67%).
The top two A Group losers on the BSE were—DLF (down 7.24%) and United Spirits (down 6.28%).
 
The top two B Group gainers on the BSE were—Nile (up 19.96%) and Archidply Industries (up 19.91%).
The top two B Group losers on the BSE were—Sheetal Diamonds (down 13.11%) and Globus Corporation (down12.82%).
 
Out of the 50 stocks listed on the Nifty, 12 stocks settled in the positive. The key gainers were Sun Pharma (up3.73%); Asian Paints (up 2.33%); UltraTech (up1.62%); Bharti Airtel (up 1.56%) and Cairn India (up 1.33%). The major losers were DLF (down 7.46%); Reliance Infrastructure (down 4.82%); RIL (down 4.76%); Hindalco Ind (down 3.96%) and BHEL (down 3.75%).
 
Markets in Asia closed mostly lower on concerns that the corporate earnings might be impacted on account of the continuing slowdown in the global economy. fresh concerns about Greece and Spain also dented investor sentiments.
 
The Shanghai Composite, which was closed last week for the Golden Week holiday, settled 0.56% down. Among others, the Hang Seng dropped 0.89%; the Jakarta Composite and the Straits tanked 1% each; the KLSE Composite settled flat with a negative bias; the Seoul Composite declined 0.67% and the Taiwan Weighted settled 0.97% lower. The Japanese market was closed for trade today.
 
At the time of writing, the key European indices were down between 0.06% and 1.42% ahead of a crucial meeting of European finance ministers to look for ways to ease the region’s debt crisis. At the same time, US stock futures were in the red, indicating a lower opening of US stocks. 
 
Back home, foreign institutional investors were net buyers of stocks aggregating Rs4,351.99 crore on Friday whereas domestic institutional investors were net sellers of shares totalling Rs189.10 crore.
 
Kalpataru Power Transmission, engaged in power transmission equipment, has bagged orders worth Rs604 crore, mainly from the Power Grid Corporation of India (PGCIL). The company has received two projects worth Rs571 crore from PGCIL and another order worth Rs33 crore from a private company. The stock gained 1.19% to close at Rs89.65 on the NSE.
 
Neyveli Lignite Corporation has inked a joint venture agreement with a Uttar Pradesh government undertaking company for setting up a 1,980-MW coal-based thermal power project in the state at an investment of Rs11,128 crore. The Rs11,128 crore project is expected to come up in Ghatampur Tehsil, Kanpur Nagar District, Uttar Pradesh in which NLC will hold majority stake of 51%. The stock advanced 1.17% to settle at Rs86.15 on the NSE.
 
FMCG firm Dabur India on Monday announced the re-launch of “Thirty Plus” brand with a new formulation. Years after it vanished off the store shelves, India’s first-ever rejuvenator brand is now making a comeback with its new owner Dabur India. The stock declined 0.94% to close at Rs131.65 on the NSE.
 

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EGoM has tentatively resolved issues on one-time fee: Sibal

The EGoM, in its previously meeting could not take a decision on levy of the one-time charge in absence of a legal opinion from the Attorney General on the proposal to levy one-time fee on existing telecom operators

New Delhi: A high-powered ministerial panel headed by Finance Minister P Chidambaram on Monday "tentatively resolved" all issues concerning a proposal to levy one-time fee on existing telecom operators, Communications Minister Kapil Sibal said, reports PTI.

 

A final decision based on the recommendations of the Empowered Group of Ministers (EGoM) would be taken by the Cabinet headed by Prime Minister Manmohan Singh later this month, he said without elaborating.

 

"We had a two-hour meeting today. We have tentatively resolved all the issues. We are now moving to the Cabinet and will try and get it to the Cabinet on 16th October, if possible, so that the matter can be finalised," he told reporters.

 

The EGoM, in its previously meeting on 3rd October, could not take a decision on levy of the one-time charge in absence of a legal opinion from the Attorney General on the issue.

 

Refusing to comment on the decisions taken by the EGoM today, Sibal said, "Till the matter goes to the Cabinet, I couldn't possibly tell you the details of the decision but all the issues placed that were placed before the EGoM have been resolved."

 

The DoT had earlier made four proposals to the Cabinet on one-time fee -- no charge; levy a one-time fee on all airwaves held by existing telecom companies; impose a fee on airwaves held beyond the start-up spectrum of 4.4 MHz; or levy a fee on airwaves held beyond the contracted spectrum of 6.2 MHz.

 

Existing players were allocated pan-India permits with 4.4 Mhz of airwaves frequencies at price of Rs 1,658 crore but new telecom operators will have to pay a minimum of Rs 14,000 crore for similar set of airwaves for pan-India business in auction that are scheduled to start in November.

 

Sibal said the timing of the Cabinet meeting depends on the Prime Minister's Office. "If the Cabinet meets on 16th October, we will try that the Cabinet takes a decision on all issues... We are trying to resolve all these issues before 19th October."

 

Last date for submitting application for participating in spectrum auction is 19th October.

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