Year 2012 revealed the risks that trading systems managed by the bourses were exposed to. A flash crash that triggered a massive value erosion of the Nifty, and index heavyweights raised a lot of questions. And so did the handling of ONGC's share sale (offer-for-sale).
In early October, the Nifty crashed 900 points due to 59 erroneous trades worth Rs 650 crore, being sold due to a ‘fat finger’ error by broker Emkay Global. This prompted SEBI to beef up risk management systems adopted by exchanges.
In December, SEBI capped order value at Rs 10 crore, introduced dynamic price bands and directed exchanges to put brokers under risk reduction mode, the moment the value of trades done by them touched 90 per cent of their collateral with the exchange.
LIC’s saving gesture
Similarly, uncertainty prevailed on the day of the ONGC issue — India’s first offer-for-sale (OFS) through stock exchanges (of 42.7 crore shares at a floor price of Rs 290 a share).
At 3-20 p.m., ten minutes prior to close, the BSE and NSE Web sites showed that bids were received only for 1.43 crore shares, or just over three per cent of the issue size. The imbroglio was resolved only by 9.30 p.m. LIC bought about 37.7 crore shares (4.4 per cent in the company out of the five per cent offered for sale) of the 42.7 crore shares that were on offer at about Rs 303 a share. With this, LIC's stake rose to 9.48 per cent.
SEBI overhauled the OFS subsequently and as a result the NMDC offer-for-sale in December was oversubscribed. It got bids for 49.55 crore shares against the offer of 39.64 crore shares with the indicative price fixed at Rs 149.23 against the floor price of Rs 147.
Sahara episode
Another unforgettable event was the SEBI-Sahara standoff. The Supreme Court upheld the SEBI order (which was also upheld by SAT) directing two Sahara companies (Sahara Housing Investment Corporation Ltd and Sahara India Real Estate Corporation Ltd), to refund over Rs 24,400 crore collected from 2.21 crore depositors through an instrument known as optional fully convertible debentures along with 15 per cent interest within November 30,2012.
The apex court also pointed out that only SEBI had the jurisdiction to regulate even unlisted firms dealing with securities. The Supreme Court further said “principles of natural justice are only for those who indulge in fair play.”
With the refund not being effected by end November, the Supreme Court finally directed Sahara companies on December 5 to refund the money in three instalments by February 2013.
In 2012, the Multi Commodity Exchange of India (MCX) became the first exchange in India to be listed on the bourses. The MCX, which fought with SEBI over ownership, got listed on the BSE at a premium and was the first IPO to follow the new price discovery mechanism (call auction) on the day of listing. It was admitted for trading on the NSE under the permitted category.
Meanwhile, the BSE and the NSE elevated their number 2 to take over. Ashish Kumar Chauhan was appointed MD and CEO of BSE. Earlier he was interim CEO and prior to that Deputy CEO. Similarly, Chitra Ramkrishna, the current Joint Managing Director of the NSE will take over from Ravi Narain from April onwards.