The NSE on Friday cautioned stock brokers against executing orders which appear to be non-genuine and leads to deviation from the normal price discovery process. The bourse’s statement came after its derivatives segment witnessed a “fat finger” trade on Thursday, the costliest mistake in India’s capital market history.
A fat finger trade is an erroneous action resulting from pressing a wrong key or making a wrong click of the mouse. On Thursday, a trader from an unknown brokerage sold 25,000 lots of Nifty call options at 14,500 strike — with the price at a meagre 15 paise per unit against the market price of Rs 2100.
The estimated loss for the brokerage is Rs 200-250 crore .
The most well known incident happened in 2012 when a trader in Emkay Global Services punched an erroneous sell order for Rs 650 crore of Nifty stocks that led to a 15 per cent crash in the Nifty index and the brokerage suffering a loss of around Rs 60 crore.
In 2014, the Tokyo Stock Exchange saw a dealer placing an over $600 billion order to purchase blue-chip stocks
In a circular, NSE asked its trading members to strictly desist from entering or executing transactions which prima facie appear to be non-genuine on their own account or on behalf of their clients and refrain from indulging in practices which lead to aberrations in the order book.
They have been asked to put in place appropriate internal systems and procedures to ensure that such orders or transactions are not placed on the trading system of the exchange.
“Non-compliance of the circular shall attract suitable disciplinary action...which may include deviation from the trading terminals.”
The exchange said there have been instances whereby few trading members have placed orders on the exchange platform at prices which do not reflect the current market price and are far away from the last traded price.
There are also instances where trading members are placing orders at prices which are at the extreme end of the operating range defined by the exchange, it said.
Cement stocks came under pressure a day after UltraTech Cement announced a massive capacity expansion plan. Investors fear the margins of the sector may fall as the other companies follow suit amid the entry of the Adanis.
While the UltraTech share ended almost 5.50 per cent lower at Rs 5,677.40 on the BSE, ACC slipped 2.87 per cent to Rs 2134.35, Ambuja Cements 1.74 per cent to Rs 366.85 and Shree Cement by 4.33 per cent to Rs 20,679.35.
India Cements fell 3.20 per cent, Dalmia Bharat 8.80 per cent and JK Cement by 8.31 per cent. Investors feel expansion programmes could be undertaken by Adani and the others, which may impact industry’s margins.
Gautam Adani is reportedly weighing the possibility of doubling its combined capacity over the next five years after completing the acquisition of the assets of Holcim.
Analysts were also cautious about the Ukraine war which raised input costs and said the outlook for the industry remain muted. (Our Special Correspondent)