Stock Exchange Outage

SEBI’s guidelines for handling stock exchange outages: A closer look

Learn about SEBI’s new Standard Operating Procedure for managing stock exchange outages and ensuring an orderly trading environment in case of disruptions.

Stock exchange outages can disrupt trading and have a major impact on market participants. The Securities and Exchange Board of India (SEBI) has recently issued a new circular outlining a Standard Operating Procedure (SOP) for handling such outages. This article will explain the key elements of SEBI’s SOP and how it aims to minimize the impact of disruptions and ensure orderly trading.

stock exchange outage

Key Points to Handle Stock Exchange Outage

  • Definition of stock exchange outage: The SOP defines a stock exchange outage as a stoppage of continuous trading, either initiated by the exchange or caused by reasons beyond its control.
  • Reporting requirements: The affected stock exchange must inform market participants, other MIIs, and SEBI of the outage immediately, but no later than 15 minutes from the occurrence of the outage. The exchange must also update on the ongoing outage every 45 minutes until normalcy is restored.
  • Trading on unaffected segments/exchanges: In case of an outage, trading in unaffected segments of the affected exchange shall continue, and all other unaffected exchanges shall continue to trade in all their market segments.
  • Extension of trading hours: If trading on the affected exchange does not resume to normalcy even one hour (excluding 15 minutes of the pre-opening session, if applicable) before the scheduled market closure, trading hours for all stock exchanges would automatically get extended for an additional one and a half hour.
  • Business Continuity Planning (BCP) and Disaster Recovery (DR): The affected exchange is required to follow the SEBI circulars on BCP and DR as well as the circular on Standard Operating Procedure for the handling of technical glitches by Market Infrastructure Institutions (MIIs)
  • Importance of SOP: The SOP is intended to ensure that any outage at stock exchanges is handled in a harmonized and consistent manner to minimize the impact on market participants and maintain orderly trading.

Defining a Stock Exchange Outage

Defining a Stock Exchange Outage is an essential aspect of SEBI’s Standard Operating Procedure (SOP) for managing such disruptions. According to the SOP, a stock exchange outage refers to a stoppage of continuous trading on a stock exchange, either initiated by the exchange or caused by reasons beyond its control. It is important to note that this definition does not include a trading halt on account of the index-based market-wide circuit breaker.

Reporting Requirements for Outages

Reporting Requirements for Outages is an important aspect of SEBI’s Standard Operating Procedure (SOP) for managing stock exchange outages. The affected stock exchange is required to inform all market participants, trading members, and other MIIs (Market Infrastructure Institutions) about the outage immediately, but no later than 15 minutes from the occurrence of the outage. The affected exchange must also send an email to SEBI’s dedicated email id: [email protected] and update on the ongoing outage every 45 minutes from the initial intimation until normalcy is restored.

This reporting requirement is crucial as it helps market participants, other MIIs, and SEBI to take necessary actions to minimize the impact of disruptions and ensure orderly trading. It also helps all the stakeholders to be aware and take necessary measures to adapt to the situation and plan their next move. The timely reporting of outages by the stock exchange also helps in managing market expectations and minimizing the spread of misinformation.

Extending Trading Hours in Case of Outage

Extending Trading Hours in Case of an Outage is a crucial aspect of SEBI’s Standard Operating Procedure (SOP) for managing stock exchange disruptions. The SOP sets out clear guidelines for when trading hours should be extended to ensure that market participants have sufficient time to close their intraday positions. If trading on the affected stock exchange does not resume to normalcy even one hour (excluding 15 minutes of the pre-opening session, if applicable) before the scheduled market closure, trading hours for all stock exchanges would automatically get extended for an additional one and a half hours.

This extension is meant to provide ample time to market participants to take the necessary actions to close their positions and reduce the impact of disruptions on their trading activities. It also helps in maintaining market stability and orderly trading even during difficult situations. The extension of trading hours also helps in preventing any panic or unnecessary volatility during the close of market hours. It is important to note that this extension is triggered automatically, the affected stock exchange has no discretion in this matter. This is to ensure that all exchanges align with each other and market participants have a level playing field.

Details of Time Extention

  • If the outage on exchange A is resolved and normalcy is restored by 14:30, there will be no extension of trading hours for either exchange.
  • If the outage on exchange A occurs in the Cash Market and the start of the pre-opening session is delayed but begins by 14:15, there will be no extension of trading hours.
  • If the outage on exchange A occurs in the Cash Market and the pre-opening session does not start by 16:00, trading will be halted for the day on the Cash Market of exchange A. The Equity Derivative segment on exchange A and the Cash Market and Equity Derivative segment on exchange B will continue to trade till 17:00.
  • If the outage occurs up to 15:05 on exchange A in the Cash Market, the trading hours for both exchanges A and B will be extended till 17:00. The affected exchange must announce this extension within 10 minutes of the outage occurring.
  • If the outage occurs at 15:16 on exchange A in the Cash Market, there will be no extension of trading hours for either exchange.

Business Continuity Planning and Disaster Recovery

Business Continuity Planning (BCP) and Disaster Recovery (DR) are integral parts of SEBI’s Standard Operating Procedure (SOP) for managing stock exchange outages. BCP and DR measures are designed to minimize the impact of disruptions and ensure the continuity of operations. The affected stock exchange is required to follow the SEBI circulars on BCP and DR as well as the circular on Standard Operating Procedure for the handling of technical glitches by Market Infrastructure Institutions (MIIs). This includes the use of a Disaster Recovery Site (DRS) and carrying out various activities to restore operations to normalcy as quickly as possible.

Ensuring Harmonized and Consistent Handling of Outages

Ensuring Harmonized and Consistent Handling of Outages is a crucial aspect of SEBI’s Standard Operating Procedure (SOP) for managing stock exchange outages. The SOP sets out clear guidelines for the handling of outages, including the definition of a stock exchange outage, reporting requirements, trading on unaffected segments/exchanges, and the extension of trading hours. By having a clear and consistent set of guidelines, market participants, other MIIs, and stock exchanges are better able to understand how to respond to an outage and take necessary actions to minimize the impact of disruptions and ensure orderly trading.

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