ORDERS REVIEW - Sebi pulls up NSE for failed circuit filter





Market regulator Sebi on Friday censured the National Stock Exchange (NSE) for its failure to halt trading in its equity and equity derivatives markets through a circuit filter system even though the nifty index on the bourse had breached the 10% lower circuit and then the 15% level, as stipulated by law.

Sebi also directed NSE "to be careful and cautious in its dealings in the securities market and comply with all the legal requirements that govern its functions as a stock exchange".

On October 5, 2012, a dealer at Emkay Global Finance had erroneously put in an order to sell a nifty basket consisting each of the 50 index constituents worth Rs 950 crore. Within a few seconds of the order being put into the system, nifty had crashed 16% before trading was stopped by the exchange.

Sebi rules, however, stipulate that in case the index moves 10% on either side, both NSE and BSE should stop trading for an hour in both equity and derivatives segments of the market.In case of a 15% crash, there should be a cooling off period of two hours. However, Sebi found that NSE had failed to bring a coordinated trading halt. Sebi also directed NSE to carry out a comprehensive review, by an independent consultant.