9 October 2013
MUMBAI: To tackle instances of erroneous trading activities in the securities market, Sebi today proposed a slew of measures for the stock exchanges including well-defined parameters and time-bound approach for deciding on annulment of such trades.
The latest suggestions from Sebi comes against the backdrop of at least four instances of faulty trades disrupting the market in recent times, the latest being placing of erroneous orders on the National Stock Exchange in February this year.
Releasing a discussion paper on policy with regard to erroneous trades, Securities and Exchange Board of India (Sebi) said the objective is to "have a uniform policy for trade annulment."
According to the market regulator, stock exchanges shall adopt a transparent and time-bound approach to decide upon cases related to annulment of trade before making the final settlement.
Suggesting that bourses need to define minimum parameters to identify erroneous orders/trades, Sebi said that cancellation should happen only in exceptional situations.
The exceptional circumstances include fraud and market manipulation.
"Stock exchanges shall examine cases of erroneous orders/ trades and apply deterrent penalties in form of fines or suspension of trading rights of the stock broker," the discussion paper said.
At present, Sebi has not prescribed regulatory framework with regard to 'annulment of trades' and stock exchanges are empowered to take action as they deem fit.
Public comments on the paper can be submitted to Sebi till October 31.
Published by: The Economic Times