India Joins Big Leagues In Market Trading Glitches As NSE Experiences 16% Hit During Flash Crash

Friday, October 05, 2012 08:33
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India Joins Big Leagues In Market Trading Glitches As NSE Experiences 16% Hit During Flash Crash

Tags: global investing | high-frequency trading | markets

The National Stock Exchange (NSE) of India lost $58 billion resulting from 59 erroneous orders that caused a plunge in equity values.

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The incident raises investor concerns about the integrity of equities and global regulators are conducting probes of market structures and electronic trading after multiple technology glitches sharply altered market values over the course of 2012.
 
The trading glitch plops Indian market into the big leagues, citing that markets and regulators must get on the forefront of systems and technology upgrades.
 
Trading in the S&P Nifty Index along with individual companies were halted for 15 minutes after the 50-stock gauge fell as much as 16%.
 
Circuit breakers on the NSE do not kick in until after orders are already executed. Trading limits for the Nifty range from 10% to 20%.
 
Those percentages are then translated into absolute points of index movement at the end of each quarter. That determines the circuit breaker trigger point for the next three months.
 
India’s NSE controls over 90% of the country’s $28 billion equity derivatives market and handles 75% of stock trades. An increase in foreign order flow to India’s market over the last two months means that a glitch of this magnitude can impact investor confidence.
 
The glitch emanated from Emkay Global Financial Services Ltd. Trades entered for an Emkay client totaling $126 million initiated the problem.
 
The NSE has disabled Emkay and closed out the broker’s outstanding positions. The glitch happened at an unfortunate time, just when order volumes on the NSE were beginning to recover.

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