It began as just another day on the bourses, but ended as anything but. Within an hour of the stock market opening on 24 February, the first signs of trouble appeared. A little past 10 AM, the exchange feeds of the National Stock Exchange of India (NSE) for its widely tracked indices, including the Nifty, stopped across brokerages. Trading continued for about 90 minutes on India’s premier stock exchange before it was abruptly halted.

What followed was an unprecedented four-hour closure—the longest outage in NSE’s 29-year history. The chaos and confusion this unleashed was compounded by the lack of communication from the exchange until it was too late.

The extended trading session announced just minutes before the market’s usual closing time was little comfort for many traders who had to suffer losses for no fault of their own. Their intraday positions on NSE had been closed by brokers on the rival BSE (formerly Bombay Stock Exchange) a few minutes earlier to prevent penalties, had NSE not re-opened for trading.

The losses, outrage, and embarrassment the outage caused put NSE firmly on the backfoot. Even Finance Minister Nirmala Sitharaman said that it cost the government “immensely”. The exchange blamed instability in telecom links and a vendor making inappropriate changes to technical equipment; these claims are being closely scrutinised.

Pointed questions have been raised. For instance, why did the interoperability arrangement among the clearing houses of exchanges not kick in? That would’ve moved the trades to other exchanges in the event of glitches. Why did NSE not communicate its plan to restart operations on time? Why did it not shift operations quickly to its near-disaster recovery or disaster recovery sites?

This glitch was just the latest in a series of problems NSE has experienced over the years. It seemed to vindicate the concerns that market regulator Sebi Sebi Sebi Securities and Exchange Board of India alluded to at the beginning of the year.

In a 6 January discussion paper discussion paper Sebi Discussion paper on “Review of Ownership and Governance norms for facilitating new entrants to set up Stock Exchange / Depository” Read more , Sebi took aim at NSE’s market dominance—it accounts for almost 95% of equity derivatives and cash trades in India—and sought to cut it to size. The paper proposed to increase competition in the stock exchange space by easing entry barriers.

Sebi’s stand came as a surprise to some market stakeholders The Ken spoke to. The recommendations are a U-turn from those of the Bimal Jalan Committee Bimal Jalan Committee Bimal Jalan Committee The Bimal Jalan committee was constituted by Sebi in 2010 to examine issues arising from the ownership and governance of market infrastructure institutions such as stock exchanges report in 2010, which had aided NSE’s dominance.

AUTHOR

Anand Kalyanaraman

A certified Chartered Accountant, Anand chose to pack the power of numbers with words when he left a career of seven years in accounting, putting together MIS reports, and investment research to enter journalism. Before joining The Ken, Anand was Deputy Editor at The Hindu BusinessLine, a newspaper he worked at for 11 years.

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