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India’s top stock exchange halts trading after telecom disruption

The National Stock Exchange of India Ltd. shut trading in its cash and derivative segments earlier Wednesday, citing “issues” with telecom links of its two service providers, which stopped prices from updating.

“We are working on restoring the systems as soon as possible,” a spokesperson for NSE, the world’s biggest derivatives exchange by number of contracts, said in a statement. With trading now halted for more than three hours, this outage exceeds the one the bourse suffered in July 2017.

“Major volume goes through the NSE, so it will have an impact,” said Anita Gandhi, director at Arihant Capital Markets. “Fortunately, traders have access to BSE also, some will be using that as backup,” she said referring to NSE’s rival bourse.

Technical glitches have disrupted trading at several stock exchanges in the Asia Pacific region in recent months. In October, a hardware issue forced an unprecedented all-day halt on the Tokyo Stock Exchange. Australia’s stock exchange opened for less than half an hour on Nov. 16 before a software issue forced it to close for the rest of the session.

BSE Ltd. said in a statement that it continues to have normal trading in all segments.

Not Updating
The NSE handles about twice the stock volume of BSE and controls about 80 percent of India’s derivatives market.

About an hour into trading on Wednesday, traders in Mumbai flagged that levels for the cash segment on the NSE’s benchmark Nifty 50 Index as well as the Nifty Bank Index stopped updating. After nearly 90 minutes of that disruption, the exchange notified that it was shutting down all its market segments, including derivative trading.

Wednesday’s disruption at NSE revived memories of an episode in July 2017, when the NSE shut both the cash and derivatives segments due to technical issues, with traders unable to execute trades at its venue and prices not updating. Trading was later restarted after keeping traders on tenterhooks for about three hours with conflicting messages about what time operations would resume.

Image at Stake
imeet Modi, CEO & Founder of broker Samco Securities, said the NSE must consider two options to avoid systemic issues: in case the exchange is unable to reopen before the scheduled 3:30 p.m. closing time, they should extend trading time for the orderly closure of open positions. If there is no extension, then all the trades should be annulled, he said.

The markets must be given at least one hour of trading to deal with all open positions or trades, he said.

NSE has been planning an initial public offering since 2016, which was delayed after it was embroiled in a probe into whether it allowed preferential access to some high-frequency traders. The NSE has since closed the loophole, market regulator Securities & Exchange Board of India said in an order in 2019 while imposing a fine.
“The image of the exchange is also at stake,” said Gandhi, referring to Wednesday’s outage.

Derivatives Expiry
The NSE Nifty 50 Index was last seen up 0.8% at 14,820.45. The trading halt comes ahead of Thursday’s expiry of monthly derivatives contracts, which typically leads to an increase in market volatility. The S&P BSE Sensex, the BSE’s key gauge, was up 0.5% at 49,976.85 as of 3:05 p.m. in Mumbai. That’s even as the regional benchmark for Asian stocks dropped 1.9%.

“After what has happened today, algos will come into play as soon as the market opens,” said Sourabh Sisodiya, co-founder and head of investment strategy at Quantify Capital. “It will be volatile tomorrow.” Bloomberg

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