Nifty flash crash

Over 10 lakh cr of investors’ wealth erased

Published: 06th October 2012 09:58 AM  |   Last Updated: 06th October 2012 09:58 AM   |  A+A-

It was freaky Friday morning for National Stock Exchange with its 50-share index Nifty crashing by a huge 900 points in early trades due to erroneous trade orders worth over `650 crore by brokerage Emkay Global Financial Services on behalf of an institutional client, eroding an estimated `10 lakh crore of investors’ wealth.

Even as trading continued normally on Bombay Stock Exchange’s 30-share Sensex, a flash crash like situation on Nifty led to a sudden fall of over 15 per cent in the index.

This resulted in trading in the cash segment coming to halt after the steep fall triggered the intra-day circuit filter, which shuts down the system when limits on either side are breached.

As per the circuit filter system of the exchanges, a rise or fall of 10 per cent in any of the two benchmark indices--Sensex and Nifty-- leads to one-hour halt in trading  while a 15 per cent movement on either side halts trading for  two hours. In case of a 20 per cent rise or fall, the trading is halted for the entire remaining part of the day. In this case, trading was frozen for 15 minutes in the morning as this was an abnormal case. Blaming a specific dealer terminal for the freak trade, National Stock Exchange said the market circuit filter got triggered due to entry of 59 erroneous orders that resulted in multiple trades totalling to over Rs 650 crore. In stock market terminology, a freak trade is a erroneous punching order by a large trader.

“These orders have been entered by a trading member Emkay Global Financial Services on behalf of an institutional client.

These non-algo market orders have been entered for an erroneous quantity which resulted in executing trades at multiple price points across the entire order book thereby causing the circuit filter to be triggered,” NSE said.

Incidentally, the crash in Nifty occurred on a day when there were high expectations for a strong rally on the bourses following a second round of big-ticket reform measures taken by the government on Thursday relating to foreign direct investment in insurance and pension sectors.


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