Why NSE Took Three Hours, Four Attempts To Restart Trading After Glitch
NSE took four attempts to resume trading after glitch as traders remained clueless.
A software glitch struck the National Stock Exchange, India’s largest bourse, on Monday morning, not allowing it to execute orders. It took the NSE three hours and four attempts to resume trading. BloombergQuint spoke to senior officials at the NSE to piece together what actually happened…
How It Began
The exchange started pre-market trading, which allows traders to place orders for delivery and arrive at adjusted stock prices. The session, which does not allow speculation, happens between 9:00 a.m. and 9:07 a.m. At the end of it, the exchange’s software matches buyers and sellers and moves the unsold or unmatched orders to the regular market.
Traders realised by 9:15 a.m., as soon the normal market opened, that either orders remained unmatched or were not executed. By 9:23 a.m., the problem aggravated due to a high backlog and trading in the cash segment was halted by 9:30 a.m. The NSE waited for another 25 minutes to shut the derivatives segment.
The Second Attempt
The exchange said at 9:45 a.m. that it will restart trading with a pre-opening session at 10:30 a.m. and normal trading 15 minutes later. The NSE carried forward the outstanding orders from the first session. But its application, or software that matches orders, failed to start when the pre-market session started. The exchange aborted trading again.
The Third Attempt
The NSE then said it will start trading at 11:00 a.m. The pre-opening session began but the software could not move the unmatched orders to the regular segment. It again delayed trading and informed the markets at 11:57 a.m. that it will make another attempt at 12:15 p.m. The exchange couldn’t start the derivatives segment unless it could resume the cash-market operations.
The Fourth Attempt
Having failed thrice, this time the NSE decided to restart after cancelling outstanding orders. The exchange gave a 15-minute window to futures and options traders to cancel their pending orders from 12:15 p.m. to 12:29 p.m., a notice on the exchange said. It finally managed to resume trading at 12:30 p.m.
Why Didn’t NSE Cancel Orders Earlier?
If it were so simple, why didn’t the NSE cancel all unmatched orders in the second attempt. It is normally not the policy of the exchange to cancel pre-opening orders and priority is given to them, said a senior exchange official who didn’t want to be named. Outstanding orders were cancelled only as a last resort, the official said.
What Happened To Disaster-Recovery Site?
The NSE has a disaster-recovery site at Chennai, which can be used if the main board in Mumbai fails. But since the issue was with the software, which is same for both the sites, a switch wouldn’t have helped, said a senior NSE official.
Finance Ministry Steps In
The finance ministry has sought a report from the market regulator Securities and Exchange Board of India. The exchange will send a detailed report to its committee on technology, before it is presented to the board and the market regulator, Ravi Varanasi, head of products at the NSE, said in a phone interview to BloombergQuint. The committee is headed by public interest director TV Mohandas Pai and also comprises external experts S Sadagopan and NL Sarda.
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