Why the BSE's technical outage could hit the stock exchange

Technical glitches on the BSE’s trading platform seem to have become a common feature in 2014.

The fourth and by far the most serious of technical glitches this year forced the country’s oldest stock exchange to shut down trading in all its segments for two and a half hours before normal trading resumed.

Embarrassingly for the exchange, all four glitches have happened in a space of less than three months, which could undermine the confidence of both brokers and investors in the BSE.

In April this year, the exchange shifted to the BOLT plus trading system for its equity platform, a software acquired from Deutsche Boerse. BSE claimed that it was the fastest trading platform, with a response time of about 200 micro seconds.

On 7 April and then again on 9 April, technical glitches led to stock prices on the BSE not updating for a few minutes.

Again on 11 June, a similar problem led to stock prices not being updated for a minutes.

Even in the past, the BSE has halted trade thanks to technical glitches. On 1 November, 2010, the markets were closed for two and a half hours again.

According to a Business Standard report, at that time volumes in the spot equity segment halved to Rs 2,022 crore from around Rs 5,000 crore in the previous sessions.

Today’s glitch has been the most serious of the lot for the exchange as well as its members and investors using the BSE for trading in equity and derivatives (equity, currency, interest rate).

Worst hit would be those traders with outstanding positions in case the prices of those particular stocks/derivatives have moved against them in the last few hours that NSE has been open for trading.

BSE’s market share in the cash market segment is 20-22 percent, and has been stagnant for the last many years. Till a couple of years back, BSE had no presence in the equity derivatives segment worth mentioning. Thanks to incentive schemes for market makers, turnover in the derivative segment has been slowly picking up. In one trading session last month, BSE’s derivative market turnover surged past that of NSE’s.