Legal tangle: NSE denies reversal of Emkay's freak trade on Nifty

Emkay Global Financial Services said on Thursday the National Stock Exchange (NSE) has disallowed the annulment of trades carried out in a series of large erroneous orders by the brokerage on October 5, 2012.

[caption id=“attachment_745391” align=“alignleft” width=“380”] Reuters[/caption]

Last October, a series of large erroneous orders were made on a broad basket of shares by a broker at Emkay that sent NSE’s main index tumbling as much as 15.5 percent and forced suspension of trading for several minutes. The brokerage ended up selling Rs 650 crore of Nifty shares, and then had to undo the wrong trades by buying an equivalent amount of shares at higher prices, resulting in a loss of Rs 51 crore.

The loss suffered by the brokerage is more than the market capitalization of around Rs 41 crore at current market price.As on March 31, 2012, the brokerage had cash and cash equivalents of Rs 107 crore on its books.

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“The panel ( probing the error) feels gross negligence by a single member cannot be allowed to impact 60,000 trades executed by 14,000 clients of 665 exchange members,” a person aware of the NSE decision was quoted as saying in The Economic Times_._

The committee found that Emkay lacked adequate risk management systems that could have blocked the order from being executed and did not avail of a order cancellation facility provided by the exchange to annul the trades on the same day, the ET report added.

Emkay said it is considering legal action, including challenging the decision.