Over a month after the October NSE ‘flash-crash’, SEBI has decided to announce measures to prevent the occurrence of similar instances.
On the sidelines of the Asia Securities Forum, SEBI Chief U.K. Sinha said the committee set up to look into the issue had submitted the report. “The committee has submitted its report. We are likely to announce our measures very shortly. We are going to announce some measures so that there is some pre-check on orders and pricing. Some other checks also will be introduced to obviate the recurrence of such incidents.”
These measures are in response to the flash-crash on October 5, which saw the Nifty plunge 900 points (about 15 per cent) due to ‘erroneous orders’ executed by Emkay Global Financial Services.
Trading was disrupted for nearly 15 minutes following the incident.
This led to concerns being raised about systemic risks in the market.
Addressing various delegates from countries of the Asia-Pacific region, Sinha said the issue of regulating high-frequency trading and algorithmic trading was a global concern.
Aware of algo issues
“High frequency trading, algorithmic trading and co-location are some of the developments where more caution is required.
“I am aware that regulators all over the world are struggling over how to deal with this situation.
“We do not want to stop it or ban it but we want to regulate it.”
He further questioned the need for mindless speeding and its purpose.
“Whether it should be 20 milliseconds or 2 milliseconds or 100 microseconds, there has to be some stoppage somewhere. There are issues involved here. One issue is of equity. Are others getting crowded off? And whether it is helping in better price discovery or is it distorting it.”
The SEBI chief also talked about setting up a committee for a single window for the various categories of foreign investors. “Now we had the visit of the Finance Minister in our office and in his interaction with us, he indicated that he would like us to start work in that direction. We are in the process of setting up a working group on that. It will have representative from tax people, from marker participants. We aim to appoint the committee soon.”