The Technical Glitch

Nifty is an index in India used as a trading platform and was introduced in the year 1996. Nifty 50 is owned and managed by India Index Services and Products which is a wholly-owned subsidiary of NSE. The Futures and Options and commodity and derivatives trading are also done on this index.

Nifty 50 (NSE), one of the two largest trading stock markets in India stopped updating rates on the 24th of February after 11:40 am. This glitch has happened many a time in the past periods. In June 2020, the exchange’s indices had stopped reflecting fresh quotes causing a temporary freeze in Nifty 50, Nifty Bank, and many other indices levels.

On that day, the Nifty didn’t even start till 3:15, and this created tension and chaos among the brokers as they have to square off their intraday positions till 3:15. Many of the market members took to social media like Twitter, Instagram, and Facebook about the concern, frustration, and fear about the half in trading. Some of them said that there is a lack of a backup plan in NSE while some bitterly regretted the stagnancy in the stock market for such a long time.

NSE said the technical glitch was due to issues with two telecom services providers. The bourse has multiple telecom links with two service providers to ensure redundancy. It received communication from both the telecoms that there are issues with their links due to which there was an impact on the NSE system. NSE did not name the telecoms responsible.

Small traders were in more trouble as they hold the burden of NSE’s technical problems as their brokerages had unilaterally squared off intraday positions leaving those who had initiated short positions in deep losses.

But then, NSE informed that the trading will be resumed till 3:27 pm but the trading resumed after 3:45 pm and the timing was extended till 5 pm.

The Technical glitch however raises bigger concerns about the price discovery and the dislocations that have been caused in the market, which will take a few days to be corrected. At one point, after the reopening of trade, Nifty’s February futures traded at a premium of over 500 points to the spot index, which was an unprecedented move.

The timing was worse because this incidence occurred just one day before the Futures and Options monthly expiry.

SEBI has now asked for an explanation to the exchange. Now, it depends on SEBI that whether it will take disciplinary action as it has ordered a deep root-cause analysis on the incident.

Thank you.

Regards,

Nirmal Trivedi,

Kautilya,

IBS Mumbai.