National Stock Exchange grapples with system fault ahead of IPO; traders flay bourse
The disruption frustrated traders and put a spotlight on the NSE when it is facing a regulatory probe over whether some brokers were given unfair access to its servers
Mumbai: A technical glitch shut down India's National Stock Exchange (NSE) for five hours on Monday, dealing the country's biggest stock market an embarrassing blow ahead of its plans to list and leading to a surge in volumes on a rival bourse.
Trading resumed fully later on Monday, with quotes for individual stocks finally restored with just over an hour of trade left after three attempts to re-open.
The disruption frustrated traders and put a spotlight on the NSE when it is facing a regulatory probe over whether some brokers were given unfair access to its servers. The glitch also coincides with a string of record highs for Indian share indexes, including on Monday, with the country's stock markets attracting billions of dollars in foreign investments.
NSE attributed the disruption to an unidentified "software problem" and said it had not been related to any cyber-attack.
"NSE deeply apologises for the glitch. The matter is being examined by the internal technical team and external vendors, to analyse and identify the cause which led to the issue and to suggest solutions to prevent recurrence," the exchange said.
Market regulator Securities and Exchange Board of India (SEBI) said in a statement it had asked for a detailed report on the matter and ordered NSE to review its contingency plans for dealing with trading disruptions.
The finance ministry has also asked for a report, a senior ministry official said.
This will increase scrutiny of the NSE, which submitted an application for an initial public offering in December but has yet to win regulatory approval for the listing that bankers estimate could raise as much as $1 billion.
The NSE's listing plans have been delayed by a regulatory investigation due to its disclosure in December that some brokers may have been provided unfair access to its servers in recent years.
The NSE has also had to cope with a management upheaval after previous chief executive Chitra Ramkrishna resigned shortly before its disclosure about the potentially unfair access provided to traders, citing personal reasons.
Newly appointed CEO Vikram Limaye is due to take over later this month.
The disruption, which affected traders from the market's open, lasted longer than a three-hour disruption at its rival exchange, the BSE Ltd, in July 2014 because of a network outage. Traders were angry about the lack of communication and questioned why NSE did not have a back-up plan.
Although the markets re-opened for trading at midday, traders were frustrated that individual stocks were not immediately updating, or had wide gaps in bid and offer prices.
NSE said in a statement it had not invoked its business continuity plan because it was reserved for natural disasters, hardware failures and connectivity-related issues and added it had expected to rectify the problem quickly.
Most traders switched to the BSE, which saw a surge in trading volumes by about 50 percent from last week's average, while shares rose as much as 1.2 percent to a record high.
After trading resumed, the NSE's broader index .NSEI also rose as much as 1.2 percent to a record high, but volumes were only a fraction of the average seen last week.
The NSE is by far the larger index of the two, and hence any disruption is felt more widely.
Varun Khandelwal, managing director of brokerage Bullero Capital, criticized the NSE for keeping traders in the dark.
He said the exchange then compounded the confusion with failed attempts at re-starting trade and by allowing derivatives trading to continue before finally fixing the lack of stock price updates.
"Such a situation is very unfortunate and reflects very poorly on the managerial oversight at the NSE presently," he said.
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