Network outage at BSE Sensex exposes chinks in system integrity

Written by ENS Economic Bureau | Mumbai | Updated: Jul 5 2014, 18:00pm hrs
BSE Sensex, NSE NiftyTrading proceeded without interruption at the National Stock Exchange, the largest bourse. Reuters
The Bombay Stock Exchange (BSE) on Thursday halted trading across all its segments for about three hours in the morning due to a network outage, raising concerns about the soundness of the system at the oldest exchange in the country.

Market regulator Sebi has asked the exchange, which handles about 17 per cent of trading in cash equities and about 20 per cent in derivatives, to submit a written reply on the trading disruption.

However, trading proceeded without interruption at the National Stock Exchange, the largest bourse.

The fourth disruption on the BSE this year follows snags that delayed order execution twice in April (7 and 9) and then again on June 11, after the bourse started a new platform, based on a Deutsche Boerse software, to increase speed.

However, the earlier three snags lasted only for a few minutes.

Thursdays disruption on the BSE has turned out to be much more serious that led to a drop in its turnover by nearly 65 per cent.

While its cash market turnover fell from Rs 4,315 crore on Wednesday to Rs 1,429 crore on Thursday, derivatives declined from Rs 51,535 crore to Rs 13,394 crore. Currency derivatives turnover dropped from

Rs 5,795 crore to Rs 2,427 crore.

The exchange faced network related issues. Several users were logged out abruptly due to misbehavior of some of the network components in the BSE network. BSE network connects to more than 10,000 primary connections with all telecom vendors in India participating in the network in addition to BSEs own LAN network and VSAT network provided by Hughes, said a Bombay Stock Exchange official.

Small investors, day traders and arbitragers faced problems due to the BSE shutdown. Day traders and arbitragers found it tough to square up their deals. However, it was a consolation that the Nifty was trading flat on the NSE. Trading disruption in a single exchange is not in the interest of the capital market. Sebi should take remedial measures, said stock broker Pawan Dharnidharka.

BSE officials said the exchange, HCL Comnet and Cisco will prepare a root cause analysis and present it to BSEs Technology

Advisory Committee consisting of IT heads of various companies, market experts and academics.

Subsequently, the same will be presented to BSEs board of directors, as well as the regulator Sebi, BSE said.

Sebi will decide whether the situation warrants any action or corrective measures based on the BSE reply, said a source.

According to the BSE, more than 8,000 connections log in every day. At 9.42 am, the number of primary connections had come down to less than 2,000 and hence market needed to be closed as per current regulations applicable to closure of markets, the BSE official said.

The problem was resolved by 12.15 pm before the market could be started from the Disaster Recovery Site located at Dhirubhai Ambani Knowledge City.

The BSE Sensex closed at 25,823.75, down 17.46 points from Wednesdays close, after hitting life-time high of 25,999.08.

The NSE 50-share Nifty today moved down 10.35 points, or 0.13 per cent, to finish at 7,714.80 after hitting all-time high level of 7,754.65 in early trade.