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Measures to check flash crash soon

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SummaryThe Securities and Exchange Board of India will soon announce a set of checks and balances to minimise the probability of a flash crash in the stock market.

The Securities and Exchange Board of India (Sebi) will soon announce a set of checks and balances to minimise the probability of a flash crash in the stock market. The committee that was set up to look into the recent episode and propose regulatory changes has already submitted its report.

“The committee has submitted its report (and) we are likely to announce our measures very shortly,” said SEBI chairman U K Sinha, while speaking at the Asia Securities Forum here. “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,” he added.

Last month, the National Stock Exchange (NSE) witnessed a flash crash, when Mumbai-based brokerage Emkay Global Financial Services sent the exchange index tumbling as much as 15.5% in just a few seconds. The crash was the result of an erroneous trades worth $126 million, placed by Emkay Global.

Sinha further said that the regulator is acting on both the fronts - systematic improvement and action against lapses by market intermediaries. “Whether there were lapses on someone's front that is being looked at separately. Action is being initiated in that regard,” he said.

The SEBI chairman also reiterated the concerns that global regulators have with technology and high frequency trading. He highlighted the fact that early this year SEBI came out with a set of regulations for high frequency trading and algo trading to provide a minimum level of price check, quantity check and order value check.

“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 said.

Meanwhile, on a different note, the SEBI chief said that the capital market watchdog is looking at aligning various routes available for foreign investors. “We are in the process of setting up a working group on that. It will have representative from tax people and from marker participants. We aim to appoint the committee soon,” he said.

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