Wednesday, 12 July 2017 06:00

Trading Halts, Confusion From India to Indonesia on Manic Monday

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Asia’s stock exchanges have had smoother starts to a week.

India’s National Stock Exchange, the country’s biggest bourse, suffered its longest ever halt on Monday after an unidentified glitch disrupted orders and price feeds, forcing the operator to freeze all equities and derivatives trading. Indonesia was also hit with a data issue and responded with its own shutdown. In both cases, brokers said that confusion reigned even after the venues had announced the suspensions.

It all added up to an unhappy Monday, with volume in Indonesia hitting its lowest level in a year while the benchmark index fell 0.7 percent. India’s NSE, already under pressure from an investigation into its practices toward high-speed trading, and with a proposed initial public offering seemingly in limbo, tried and failed to reopen its markets at least twice, before finally restarting after more than two-and-a-half hours.

“Lessons need to be learned from incidences like these and utmost precaution should be taken to avoid a recurrence,” said Dipan Mehta, an NSE member. “The bourse could also be efficient in communicating the issues, if they happen again, and minimise the chaos that prevails in these circumstances.”

NSE’s problems started soon after the open, when traders were unable to execute trades and prices were not updating, according to Arun Kejriwal, founder of Kejriwal Research and Investment Services. The bourse shut both the cash and derivatives segments at 9:55 a.m. local time and said premarket trading would resume at 10:45 a.m. Technical issues persisted, forcing it to delay the restart to 11 a.m. before it finally reopened at 12:30 p.m. A pricing display issue was still being addressed even after that.

Chaos and Confusion

Ashish Shah, head of equities at Mumbai-based A.C. Choksi Share Brokers Pvt., said his firm placed orders for AU Small Finance Bank Ltd on its first day of trading. As of 3:15 p.m. local time, he was still waiting to find out if his firm owned the stock, which rose 51 percent on its debut.

“We punched in the trades and they are still pending, and we don’t know whether we got the shares,” said Shah. “Will they be scrapped, reversed or executed? The bourse could have done a better job at communicating as clarity reduces chaos.”

The NSE handles about twice the stock volume of rival BSE Ltd and controls about 80 percent of India’s derivatives market, which is among the world’s largest. The exchange company, which has filed for an initial public offering, has been embroiled in a probe into whether it allowed preferential access to some high-frequency traders. BSE saw its volume almost double over previous days, data compiled by Bloomberg show.

“NSE deeply apologises for the glitch,” it said in an emailed statement. “The matter is being examined by the internal technical team and external vendors, to analyse and identify the cause which led to the issue and to suggest solutions to prevent recurrence.” A Securities and Exchange Board of India spokesman declined to comment on the developments.

Jakarta Troubles

Trouble on the Indonesia Stock Exchange started at the open at 9 a.m. local time, said Andrew Clarke, director of trading at Mirabaud Asia Ltd in Hong Kong. The bourse imposed its halt at 9:34 a.m., blaming an issue in its market information distribution system. While trading restarted soon after 10 a.m., daily volume hit its lowest since June 3, 2016, with 3 billion shares changing hands.

“I don’t think there’ll be a significant impact on IDX, glitches happen elsewhere too,” said Indra Mawira, a fund manager at PT Panin Asset Management in Jakarta. “But still it’s not a good precedent given that it took over an hour and shows that the exchange should be investing more in back-ups.”

Malfunctions and halts are a fact of life in modern stock trading, in which computers carry out the vast majority of operations. Nevertheless, market-wide suspensions are relatively rare. Singapore Exchange Ltd shut trading early in July 2016 because of a technical malfunction, and after failing to follow through on two pledges to reopen. The Australia Stock Exchange opened late and closed early one day in September because of a glitch, its worst disruption in almost five years.

India’s NSE suffered a disruption that halted trading in the futures and options and cash segments in December 2015, while in June 2014 BSE faced a technical error that led to a three-hour halt — the longest on record for Asia’s oldest exchange. BSE also suffered a two-and-a-half hour stoppage in November 2010 due to a technical fault involving trade confirmations.

“Investors who didn’t get any information till mid session were left confused,” said Anita Gandhi, director at Arihant Capital Ltd “And those traders who have only the NSE feed and not the BSE feed also suffered. The exchange’s reputation got hurt in the process.”

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