Just before afternoon on Wednesday, tickers of NSE’s major indices like Nifty50 stopped moving. At noon, market participants realised that the problem was much deeper, as NSE’s official twitter handle said trading was being halted in all segments of the stock exchange because of a failure in the communication links provided by its two telecom service providers.
“This is not done. I had sold positions in the market, how will I cover them now… who is going to pay my margins,” the broker-trader lamented.
His fear rose from the fact that between 3:15 and 3:30, brokers have to automatically square off any intraday positions.
Chaos and hysteria intensified in the market, as trading did not resume even after 1:15 pm as was being indicated by several brokers to their clients and in messages that flooded traders’ WhatsApp groups.
Several market participants took to social media platforms like Twitter and WhatsApp to vent their frustration and fear over the trading halt. Some questioned the lack of a backup plan from NSE, while others rued the fact that the stock exchange kept mum for such a long stretch of time.
“Someone sitting at NSE taking a couple of lakh salary per month is deciding the fate of millionaire traders. Why did they shut down the exchange without informing in advance. It was a small issue of not updating the index spots. They magnified it by closing down everything,” Pawan Arora, an individual trader, tweeted.
This is not the first time NSE has faced such a technical glitch. Last June, the exchange’s indices had stopped reflecting fresh quotes causing a temporary freeze in Nifty50, Nifty Bank and some other indices’ levels.
Back in 2017, a major technical glitch had hit the bourse, forcing trading halt across segments for hours. That incident, too, had resulted in similar chaos as was visible on the trading floors on Wednesday.
“The biggest question in this whole issue is, why was the entire market shut just because the index feeds were not refreshing? Feeds for the underlying contracts were fine, and so was order matching. So, why shut down the entire market?” asked Jimeet Modi, CEO and Founder of Samco Ventures.
Small traders were left holding the baggage of NSE’s technical problems, as their brokerages had unilaterally squared off intra-day positions leaving those who had initiated short positions in deep losses.
“…(My broker) squared off my intraday trade at 2.55 pm on its own, now who is gonna bear my intraday loss? Our trade has been squared off on BSE without our intimation,” lamented an individual trader.
NSE’s communication skills came into question, as the exchange informed about the resumption of trading only around 3:27 pm, and tweeted it officially only at 4 pm, full 15 minutes after trading had already resumed at 3:45 pm.
“Such a lengthy halt was indigestible for us… but thankfully, they extended the timing and allowed traders to square off positions,” said a dealer with a city-based brokerage.
The technical glitch, however, raises bigger concerns about price discovery and the dislocations that have been caused in the market, which will take a few days to be corrected. For instance, at one point after the re-opening of trade, Nifty’s February futures traded at a premium of over 500 points to the spot index, which was an unprecedented move.
“The total lack of communication from the regulator, from the exchange or from the government and no empathy for the end customer who is paying a heap load of taxes was astonishing,” Ajay Bagga, an independent market expert, told ETNow.
While the market will move on from the chaos and paranoia that ensued in the market today, it is the small investors who will bear the scars for some time to come.
