SEBI mulls rules after freak NSE crash

The Securities & Exchange Board of India has said it will consider a policy on annulment of erroneous or freak trades, in the wake of the freak crash on the National Stock Exchange (NSE) earlier this month.

The Nifty, the 50-stock barometer of the NSE, saw a 15-per cent plummet due to a technical glitch on the Friday previous to the last (See: Sebi probes NSE Friday 'crash'). The exchange soon recovered to come in line with the Bombay Stock Exchange's Sensex, which rose to a 15-month record of over 900 on that day.

''SEBI has set up a group of experts that is looking at various aspects. Discussions with experts are taking place and some measures can be expected in foreseeable future to deal with flash crash situations,'' U K Sinha, chairman of the stock market regulator, said on the sidelines of an industry body conference in New Delhi on Friday.

Sinha did not however assert that a step to change existing risk management guidelines was in the immediate offing. ''Our risk management has played out very well and has withstood the test of time since 2000. So we want to be cautious in whatever new structures we come out with. We will do wide range of consultations, stress testing and scenario building etc,'' he said.

The SEBI chairman also made it clear that the regulatory interests of wider retail participants are more important to the regulator than attracting new-age investors who rely on high frequency (HF) trading.

''Risk management is more important than speedy execution and certain checks on algorithmic or HF trading are required. The guidelines or disincentives laid out by SEBI earlier this year have been appreciated by International Organisation of Securities Commission as a landmark development,'' he said in response to experts' demand for improving latency on Indian exchanges.