Sebi asks BSE to explain trading halt

The Securities and Exchange Board of India (Sebi) has asked the Bombay Stock Exchange (BSE), the country’s oldest equity exchange, to explain the glitch that halted equity trading for over two-and-a-half hours on Monday.

A problem in the software, which was unable to send trade confirmation to the members, compelled BSE to shut trading from 12 pm to 2.30 pm. Following this, volumes in the spot equity segment halved to Rs 2,022 crore from around Rs 5,000 crore in the previous sessions.

BSE’s rival, the National Stock Exchange (NSE), reported a turnover of over Rs 14,675 crore in spot equity trading.

A top BSE official told Business Standard, “The problem was first witnessed at 10.45 am, after which trading was halted for 10 minutes. However, to resolve the issue, it was decided to halt trading in the BSE Bolt (BSE Online Trading) system at 12 pm. We resolved the issue at 1.20 pm, re-checked the systems and commenced trading from 2.30 pm. Trading will resume in a normal way tomorrow.”

The orders that were pending at 12.00 pm were rejected. BOLT, developed by CMC (a Tata Group company), was launched in 1995, and has undergone several changes since. Recently, the exchange made both cash and derivatives quotes available on a single screen.

CMC is headed by S Ramadorai, who is also the non-executive chairman of BSE. BOLT handles more than 2.5 million trades and over 18 million orders every day.

While the market was largely unaffected as BSE has a minuscule market share in comparison to NSE, some brokers said they were not able to execute orders in scrips listed only on BSE. According to the BSE website, 18,291 companies are listed on it, of which only 3,000 scrips are actively traded. To attract derivatives volumes, the exchange is in the process of replacing cash settlement in the futures and options segment with physical settlement from December.

While BSE’s equity derivatives segment has been a non-starter, the exchange’s market share in the cash segment has fallen from over 25 per cent to around 21 per cent in the past few trading sessions, a trend noticed during the derivatives expiry, after which volumes returned to normal.

NSE has 98 per cent share in equity trading, mainly due to over Rs 1.5 lakh crore average daily equity derivatives volumes it generates.

Though such technical glitches have not been new to BSE, trading has not been halted of late, except in one instance in 2002. In July 2009, 80 stocks on BSE belonging to ‘S’ and ‘Z’ categories and the trade-to-trade group, which normally attracts five per cent circuit breakers, saw an unusual price movement of up to 20 per cent that triggered stop losses. Also, a technical issue was witnessed in the BSE’s derivatives segment in January 2008.