Market regulator Securities Exchange Board of India (SEBI) has issued show-cause notices to top executives of National Stock Exchange (NSE) for the 24th February trading halt, says a report.
Quoting people with direct knowledge of the matter,
a report from The Economic Times, says, “The notices have been issued for violating SEBI’s stock exchange regulations, including deficiencies in ‘orderly execution of trades’ and for not having adequate surveillance systems in place to ‘ensure market integrity’. SEBI is also probing the role of NSE at the institutional level separately.”
Both SEBI and NSE did not respond to the queries from the newspaper.
Interestingly, soon after the trading halt, the market regulator tried to brush aside the issue, saying that trading outages are an area of concern in other important jurisdictions.
In its release on 25 February 2021, it had said, “SEBI has already advised NSE to expeditiously carry out a detailed root cause analysis of the trading halt and also to explain the reasons for trading not migrating to the disaster recovery site, as per the prescribed norms. SEBI would take all necessary measures to ensure rectification of the underlying causes including addressing institutional deficiencies.”
SEBI had also asked NSE to explain the reasons for not migrating trading to its disaster recovery site.
However, paying heed to outrage on social media, finance minister (FM) Nirmala Sitharaman spoke about the trading halt at NSE and the ‘cost’ of such incidents for the financial markets. Noting that glitches and faults turn up even in cases where there is ‘foolproof’ security, she had said, “In the NSE where there was a glitch, a kind of technology-driven glitch, nobody could have anticipated it...but that has cost us immensely, and lessons are being learnt.” The FM was speaking at a virtual conference on Civil Accounts Day.
Soon after the trading halt, NSE had blamed telecom links for the ‘technical glitch’. Amidst different claims and liabilities, nearly after a month, NSE blamed the storage area network (SAN) system, especially the failover logic provided by its vendor, for the trading halt.
In a statement, NSE had said, “...on 24th February, post link failure, the SAN system at the primary data centre stopped functioning, which was completely unexpected. Subsequent incident analysis showed that the problem was caused by failover logic implemented by the vendor, which did not conform to NSE’s stated design requirements, coupled with issues in the configuration done by the SAN vendor that triggered the failover logic.” (
Read: NSE Blames Storage Area Network System for Outage on 24th February!)
Trading was halted at the NSE for nearly four hours on 24 February 2021 reportedly due to telecom links failure leading to unavailability of the online risk management system of the NSE Clearing Ltd (NCL), a wholly-owned subsidiary of the NSE, which is responsible for clearing and settlement of all trades executed on the NSE.
NSE stopped updating at 10.08am, which led to the closure of the futures & options (F&O) segment by 11.40am and the cash market by 11.43am. It affected the online risk management system, due to which market functioning had to be halted.
NSE informed that trading was halted at 11.40am due to ‘issues with the telecom service providers’ links. There was an issue with live ticks for NSE indices like Nifty 50, Nifty Bank, and others across brokers.
The outage had occurred on the penultimate day of expiry of the February futures contracts when the transaction volume load was higher than usual.
In its monthly bulletin, the Reserve Bank of India (RBI) had blamed the closure of NCL for the massive shut down of trading at NSE. In an article titled ‘State of the Economy’ published in its monthly bulletin, the central bank had said, “The major issue in this incident was the ineffectiveness of interoperability because of shutting down of the NCL...Another important failure was the inability to switch operations to the disaster recovery site...Brokers believe that timely communication and clarification could have averted the panic sell-off by online traders on the BSE and prevented huge losses to investors.” (
Read: NSE Trading Halt: RBI Says Failure at NSE Clearing Led to Outage on 24th February)
As reported by Moneylife, the February trading halt at NSE was the ninth such glitch at the bourse since July 2017. NSE is the largest derivatives exchange globally and the third-largest in the cash segment by volume.
Among the various issues that it faced in the last three years were—a malfunction with its front-end software for brokers, called NOW, leading to orders placed by brokers repeated by the system several times and in some cases, hundreds of times, resulting in unintended trades; NSE being unable to upload end-of-day data on futures and options contracts on its website or other issues, like 24th February’s telecom problem, that were blamed on the vendor. (
Read: 9 Glitches in NSE’s Trading System in Less Than 4 Years)
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