The Securities and Exchange Board of India (Sebi) has issued a circular outlining how to handle market activities during an outage.
The stock exchanges have seen frequent disruptions of late due to outages. To ensure the smooth functioning of cash and equity derivative markets, the Securities and Exchange Board of India (Sebi) has issued guidelines on the procedures to follow during an outage.
In a circular on January 9, 2023, Sebi issued operating procedures to handle such situations. In 2017, the National Stock Exchange (NSE) halted trading for three hours after an outage. In November 2022, brokerage firm Zerodha also faced similar disruptions. The Bombay Stock Exchange (BSE) had also faced such situations.
In the circular, Sebi noted that every market participant, including the market infrastructure institutions (MIIs) should ensure continuous trading of securities. All participants, including MIIs, must be promptly informed about the outage if the trading activity is disrupted.
Sebi has asked the exchanges to inform the stakeholders and Sebi within fifteen minutes of an outage through an email at: techglitch@sebi.gov.in. They can also inform the market participants, trading members, and MIIs through broadcast messages and their website.
Also, the exchange must update about the situation every 45 minutes until it is restored.
Sebi divided the procedures to extend the trading hours in four segments.
For outages less than one hour, Sebi said if the affected exchange restores its trading at least one hour (excluding 15 minutes of pre-opening session) before the normal scheduled market closure, the trading hours on that day would remain unchanged.
For outages more than one hour, Sebi said the trading time for all exchanges would automatically extend by one-and-a-half-hours for that day.
In addition, this development must be intimated to all market participants, MIIs, and Sebi one hour fifteen minutes before the normal scheduled market closure.
The affected exchanges should also issue a notice for trading hour extension.
If the outage lasts for more than 45 minutes and post normal scheduled market closure, Sebi said no further trading would be allowed on the affected stock exchange for that day.
Regarding stock exchanges that did not experience an outrage, Sebi said they would continue to operate till the extended time (one and half hours).
“The affected exchange would have to suitably intimate the same to market participants, other MIIs and SEBI latest by 45 minutes post normal scheduled market closure,” said Sebi.
If the outage occurs during the last trading hour of normal operation and 15 minutes before the normal scheduled market closure, Sebi said the trading hours for all stock exchanges would automatically get extended by one and half hours for that day.
In addition, they should intimate about the same to market participants, MIIs and Sebi immediately but not later than 10 minutes from the occurrence of outage.
In addition, after receiving the communication from the affected stock exchange, the unaffected stock exchanges would also suitably issue a notice with regard to extension of trading hours on their stock exchanges.
According to Sidhavelayutham M, founder & CEO, Alice Blue, a Bengaluru based discount brokerage company, "It is undoubtedly a great step by Sebi, and we will comply with the standard operating procedures in case of any stock exchange outage. Since the market operates for a limited time and any technical glitch can cost an earning opportunity. Hence the extension of trading hours in such events will definitely benefit the clients, and we welcome such initiatives by Sebi."
"We will maintain continuous communication with the stock exchange and pass on timely updates to our clients, and follow any extended trading hour guidelines issued by the stock exchange or Sebi," Sidhavelayutham further added.