Thursday’s freak trade, the third such incident in 2013, in Nifty futures happened with multiple contracts changing hands with a peak level of 5,996
 

In yet another freak trade, the National Stock Exchange (NSE)’s October futures surged 2.8% to near 6,000 levels before paring gains. At the 5,996 level, the near month contract (October futures) was priced higher than even the November future prices, which made a high of 5,984.
 

Multiple contracts in the Nifty October futures changed hands on the NSE, with a peak level of 5,996, a gain on the day of as much as 2.87%. They quickly dropped back for a gain of about 1.5%.
 

The reason behind this freak trade is yet to be discovered by the exchanges, it can be system failure or any unusual trading activity which creates this price movement.

This is the third such incident of freak trade on NSE in 2013. Earlier in February, share prices of Tata Motors and Ultra Tech fell by 10% in a jiffy, where trade from brokerage Religare Securities had caused the crash.
 

Earlier on 5 October 2012, the Nifty crashed by over 900 points when a dealer for stockbroker Emkay Global punched a wrong order. While NSE quickly blamed Emkay for the crash, but has not bothered to explain why its market-wide circuit filters failed to work. And now, NSE is seeking approval from the market regulator for its proposal under which brokers will have to collect margin money upfront from investors for trading in shares or the cash segment, similar to futures and options (F&O) trading.
 

At present, Exchanges collects upfront margins from brokers, but brokers do not ask clients for money in advance in the cash segment. In short, brokers are funding the clients, who settle the trades on next day using the ‘T+1’ settlement. The NSE move follows a show cause notice issued by SEBI, after the 5 October 2012 flash crash.

NSE blamed 'abnormal' orders, worth $126 million, placed by the stockbroker in multiple trades of various stocks at low prices, for the crash. NSE claimed there were no technical glitches in its system and the crash was due to 'erroneous' trade orders worth over Rs650 crore by Emkay, which was disabled by the bourse for trading. Both, Emkay and Religare have challenged the decision of the exchange in the Securities and Appellate Tribunal.

As Moneylife has already said, the NSE as well as the BSE seems to have ignored every check prescribed by market regulator Securities and Exchange Board of India (SEBI). Trading was not halted in both bourses and across market segments; but the regulators’ only reaction was to launch an investigation.
 

The NSE has always successfully evaded a close scrutiny of all technology issues for over a decade. In its initial years, especially under the leadership of the late Dr RH Patil, the NSE was seen as an extension of the regulator and the government system. Not any more. Today, the NSE is driven by profits, pay and perquisites of senior executives, which are tied to a desperate need to maintain market share.