Trading halt at NSE on February 24, 2021

PR No. 9/2021

Trading halt at NSE on February 24, 2021

In continuation to SEBI Press Release (PR No. 8/2021) dated February 24, 2021 and in response to various media articles on the matter, it is clarified as under:

1. SEBI recognises Stock Exchanges/ Clearing Corporations as important Market Infrastructure Institutions (MIIs). MIIs are professionally managed with an independent Governing Board and are designed to function at an arms-length relationship from the Regulator. They have the necessary experience and expertise to deal with operational aspects of the functioning of the market, albeit under a transparent framework laid down by SEBI.

2. In the instant issue of trading halt at NSE on February 24, 2021, NSE informed SEBI at around 11.30 am on February 24, 2021 that it had issued a communication to the market for halting trading from 11.40 am due to “issues with the links with telecom service providers”. NSE took this decision based on its own internal assessment regarding the severity of the technical issues it was experiencing at that time.

3. SEBI was in constant touch with NSE officials and continued to monitor the situation closely. NSE informed that it was continuously working on resolution of the problem and that it would intimate the market regarding resumption of trading once the issue gets resolved. Market participants were notified by NSE at 3:17 pm that trading will resume from 3:30 pm and trading hours were extended from 3.30 pm to 5.00 pm at NSE, BSE and MSEI.

4. It is pertinent to note that despite the trading halt, the framework of interoperability put in place by SEBI facilitated market participants to continue their transactions at other stock exchanges, thereby allowing them to seamlessly trade / square off their existing positions. The same is evident from the fact that the trading turnover at BSE in equity segment jumped to Rs. 40,600 crore on February 24,2021 as compared to an average daily trading turnover of approximately Rs. 5,200 crore during the previous 30 days.

5. Over and above the market design of interoperability, which facilitates a market participant to trade on multiple trading platforms, the decision to extend the market timings also enabled investors to square off their existing positions.

6. SEBI has put in place a comprehensive framework to deal with incidences of technical glitches at MIIs. Some salient features of the framework include the following:

• MII to submit a detailed root cause analysis to SEBI within a time bound manner after due vetting by the Technology Committee and Governing Board of the MII.
• This report to be placed before Technical Advisory Committee (TAC) of SEBI, which consists of eminent academicians and technocrats.
• Monitoring mechanism for ensuring corrective action alongwith appropriate penalty wherever warranted.

7. Recognizing the importance of Business continuity, MIIs are required to carry out live trading from disaster recovery site for 2 consecutive days every six months apart from having to conduct quarterly disaster recovery drills.

8. With a view to ensuring the robustness and integrity of the technology systems, MIIs are required to carry out comprehensive annual systems audit. The audit report is required to be vetted by the Technology Committee and the Governing Board of the MII.

9. SEBI has already advised NSE to expeditiously carry out a detailed root cause analysis of the trading halt and also to explain the reasons for trading not migrating to the disaster recovery site, as per the prescribed norms. SEBI would take all necessary measures to ensure rectification of the underlying causes including addressing institutional deficiencies.

10. It may be mentioned that trading outages are an area of concern in other important jurisdictions as well. Exchanges in UK, Japan, Australia and New Zealand have suffered trading outages in the recent past.

Mumbai
February 25, 2021