The Securities and Exchange Board of India (SEBI) on Thursday announced the interoperability of stock exchanges to establish a system that addresses the consequences of any possible outage at one exchange.
National Stock Exchange (NSE) and BSE would act as alternative trading venues for each other at the beginning as a part of this framework, SEBI said in a circular on Thursday. This will come into effect from April 1, 2025.
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“In case of outage of a trading venue (i.e. stock exchange) during trading hours, the participants with open positions would be exposed to price risk…. In such a case, the multi-exchange set up along with interoperability among clearing corporations could be leveraged to provide an alternative trading venue to end investors,” SEBI said.
The markets regulator has asked the exchanges to prepare a joint standard operating procedure (SOP) that would include a plan to be invoked at the time of outage on one exchange along with the flow of activity involving the affected exchange and its alternative trading venue, and roles and responsibility of each of them. The exchanges have been directed to submit the SOP to SEBI within 60 days.
As per the circular, the affected stock exchange has to intimate SEBI and the alternative trading venue about the invocation of the instant business continuity mechanism within 75 minutes of the occurrence of the impact. After this, the alternative trading venue would invoke the business continuity plan as per the SOP within 15 minutes.
The regulator has directed exchanges to take the necessary steps to put in place the requisite infrastructure and systems for the implementation of these measures.
In the case of scrips exclusively listed on one exchange, the circular said the reserve contracts for those scrips may be created by exchanges to ensure continuity.
On common stocks, single-stock derivatives, correlated indices, and currency derivatives, SEBI pointed out that participants can hedge their open positions by taking offsetting positions in identical or correlated indices on other exchanges.
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“As these segments are interoperable, taking offsetting positions in another trading venue would net off such open positions for end clients and release the margin. Hence, no separate treatment is required for such category of products,” it said.
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