Sebi to announce new measures to prevent 'flash crash'

Sebi has been working on measures after a faulty order sent Nifty falling 15% in October

Capital market regulator Securities and Exchange Board of India (Sebi) will soon announce set of measures to avoid recurrence of 'flash crash' incidents in the market. These new measures might include pre-checks on orders and pricing.

“We are likely to announce our measures very shortly.  We are going to announce some measures so that there is some pre check on orders and pricing. Some other checks also will be introduced to obviate the recurrence of such incidents (flash crash),” said UK Sinha, chairman, Sebi on the sidelines of Asia Securities Forum 2012.

In October, an erroneous order by Emkay Global Financial Services, had led to a  900 points (15 per cent) crash on the benchmark Nifty, forcing a 15 minute halt in trading. Following this incident, Sebi had set up a committee, comprising of technical experts, to look into this crash and suggest preventive measures.

Sinha said that the committee has already set up its report on the crash and the soon-to-be announced measures will be based on this report.

The Sebi chief said that it is separate examining whether there were any lapses at the broker or exchange level would have resulted into this incident.

According to market sources, as a protective measure, Sebi could introduce temporary circuit filters for index stocks, which will be marginally lower than index circuit limit of 10 per cent. Temporary trading halt help in checking for erroneous trades and also help investors ascertain reason for the sharp movement in share price.

In a separate development, Sebi is in the process of setting up of a working group to rationalise investment routes for foreign portfolio investments in the country. The working group, Sinha said, will have representations from tax authorities and other market participants and will submit a report soon after studying nuances on aligning all various routes for foreingn portfolio investment into one single route.