The stock exchanges have seen frequent disruptions of late due to outages. The Securities and Exchange Board of India (Sebi) has issued guidelines on what to do in the event of an outage to guarantee the smooth operation of the equity derivatives and cash markets.
On January 9, 2023, Sebi issued operating procedures to deal with such circumstances in a circular. After a power outage in 2017, the National Stock Exchange (NSE) stopped trading for three hours. The brokerage firm Zerodha experienced similar disruptions in November 2022 as well. Similar circumstances had also occurred at the Bombay Stock Exchange (BSE).
Sebi stated in the circular that all market participants, including market infrastructure institutions (MIIs), should guarantee continuous securities trading. If trading activity is disrupted, all participants, including MIIs, must be informed immediately of the outage.
The exchanges have been instructed by Sebi to notify the stakeholders and Sebi via email within fifteen minutes of an outage at: [email protected]. They can also communicate with market participants, trading members, and MIIs via their website and broadcast messages.
Additionally, the exchange must provide an update every 45 minutes until service is restored.
Trading Hour Extension
The Sebi divided the procedures for expanding trading hours into four parts.
Sebi stated that the trading hours for that day would remain unchanged if the affected exchange restored trading at least one hour before the normal scheduled market closure, excluding the 15 minutes of pre-opening session.
Sebi said that the trading time for all exchanges would automatically be extended by one and a half hours for that day in the event of outages lasting longer than one hour.
In addition, all market participants, MIIs, and Sebi must be informed of this development one hour and fifteen minutes prior to the usual market closure.
Additionally, a notice for an extension of trading hours ought to be issued by the affected exchanges.
Sebi stated that trading on the affected stock exchange would be prohibited for that day if the outage lasted longer than 45 minutes after the normal market closure.
Sebi stated that stock exchanges that did not experience an outcry would continue to function until the extended period of time (one and a half hours).
According to Sebi, “the affected exchange would have to appropriately notify market participants, other MIIs, and SEBI” no later than 45 minutes after the normal scheduled market closure.
Sebi stated that the trading hours for all stock exchanges would be automatically extended by one and a half hours for that day if the outage occurs during the final trading hour of normal operation and 15 minutes before the normal scheduled market closure.
In addition, they should inform market participants, MIIs, and Sebi about this as soon as possible, but no later than ten minutes after the outage occurs.
Additionally, the unaffected stock exchanges would appropriately announce an extension of trading hours on their respective exchanges following receipt of the notification from the affected stock exchange.
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.”
Sidhavelayutham went on to say, “We will follow any extended trading hour guidelines issued by the stock exchange or Sebi,” and “We will maintain continuous communication with the stock exchange and pass on timely updates to our clients.”
