SEBI censures NSE in Nifty crash case

Coming hard on top stock exchange NSE for its conduct with regard to ‘freak’ 920-point crash in benchmark index Nifty, the Securities and Exchange Board of India on Friday censured the bourse and ordered an independent comprehensive review of its processes and systems to ensure overall market stability. In a strongly-worded order, SEBI also asked the National Stock Exchange (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.’’ SEBI also said that “the system followed by NSE is not robust” and the incident, which took place on October 5, 2012, shows that “wrong action on the part of one individual could result in bringing the entire system to a halt.’’ In the order, SEBI’s whole-time member Prashant Saran said “NSE is directed to carry out a comprehensive review, by an independent expert of the processes followed, checks in place, systems employed by NSE, not only in respect of the situation specific to this case but also for maintaining stability of markets in general.” The consultant would need to “suggest a more robust securities trading system” and submit its report to NSE within three months from the date of this order. On receipt of the consultant report, NSE has been asked, within three months thereafter, to submit a report to SEBI along with its ‘Plan of Action’ The case relates to a sudden 920-point of 16% plunge in the NSE’s benchmark index Nifty, which is widely followed by investors in India and abroad, on October 5, 2012, despite the systems requiring circuit breakers — first at 10% and further at 15% movements within a day requiring halt in market trading. — PTI The market regulator orders independent review