Sebi, NSE to take action on 'flash crash', says FM

A day after National Stock Exchange benchmark index Nifty witnessed a 900-point flash crash, Finance Minister P Chidambaram said the matter is being investigated and regulator Sebi would take necessary action in this regard.

Addressing the media after meeting top Sebi officials here, he said that he was told that there was no systemic risk in the capital market and NSE had come out with a statement explaining the incident. “I was assured there was no systemic risk,” he said.

The NSE had denied a technical glitch and blamed the “crash” on erroneous orders worth over Rs 650 crore for multiple trades by broker Emkay Global in various stocks at low prices on behalf of an “institutional client”.

Sebi is looking into all aspects of the incident, including the probability of technical problems or any intentional manipulative activities by some vested interests, as per a senior regulatory official.

The incident occurred on a day when expectations were high for an upward rally on bourses, following some big-ticket reform measures approved by the government on Thursday, including FDI in insurance and pension. Sebi would look into whether adequate safeguard mechanism was in place to avoid recurrence of similar incidents, as the so-called freak trades were executed in a number of well-known blue chip stocks, including some large banking shares.

While there is no circuit filter in large blue-chip stocks, market systems are supposed to be well prepared to handle any mischief or large erroneous trades.

The NSE has said the abnormal orders were 'non-algo' in nature and were entered for an erroneous quantity which resulted in execution of trades at multiple pricepoints across the entire order book.

The exchange has also identified these orders to a specific dealer terminal.