Ensuring Uninterrupted Trading Amid Exchange Outages
In a significant move aimed at ensuring seamless market operations, the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have introduced a backup mechanism for each other in case of major outages, effective immediately. The decision comes as part of an ongoing effort by Securities and Exchange Board of India (SEBI) to bolster market resilience and ensure uninterrupted trading for investors and market participants.
This collaborative approach will allow both exchanges to act as backup venues for each other in case one of them experiences a major technical failure or operational outage. If one exchange faces disruptions, trading on the alternative exchange can continue without significant interruption, allowing traders to maintain their positions and avoid any trading delays. This move is expected to improve the robustness of India’s financial markets, especially during times of unexpected disruptions.
NSE and BSE will act as backup exchanges for each other in case of major technical disruptions.
Aim to enhance market resilience and minimize trading interruptions.
Clear Guidelines for Alternative Trading Venue Access
The backup trading mechanism will specifically apply to several cash market segments, including the main board, SME board, equity derivatives, and T+0 securities. However, the alternative venue for trading will only be accessible once the exchanges notify each other about the outage. If an exchange experiences an issue before the market opens, it will inform the alternative exchange, ensuring that the trading session can proceed smoothly without any interruptions.
For certain trading windows, such as the Pre-Open Session and Special Pre-Open Session for IPO or re-listed securities, access to the alternative exchange will only be granted if the outage is communicated before the market opens. Additionally, the block deal window will not be available if the outage is reported after the market opens, ensuring that certain transactions remain unaffected. Other sessions, including the normal market session, post-closing session, auction trading session, and equity derivatives trading session, will proceed as usual without any disruption, even in the event of an exchange outage.
Backup venue will be available for major segments like equity derivatives and T+0 securities.
Pre-Open Sessions and block deal windows will depend on timely outage notifications.
Unique Symbol for Exclusively Listed Securities
To facilitate smooth trading, securities that are exclusively listed on one exchange will be assigned a unique suffix in their trading symbols to distinguish them when traded on the alternative exchange. This will help traders and market participants easily identify which exchange the securities belong to, ensuring no confusion during cross-listing trades.
However, this alternative trading mechanism will not apply on special trading days, such as Muhurat trading or other unplanned sessions, which are typically reserved for specific events. This limitation ensures that trading during these special sessions follows the traditional setup without any changes.
Additionally, exchanges will communicate directly with traders, sending broadcast messages on trading terminals regarding the commencement of trading for exclusively listed securities. These messages will include the exact timing for when trading will resume on the alternative exchange, ensuring that all stakeholders are well-informed.
Securities listed exclusively on one exchange will have a unique suffix.
The mechanism excludes special trading days like Muhurat trading.
Trading Norms and Compliance for Brokers
While brokers registered with both NSE and BSE will be able to trade securities listed on either exchange, there are clear rules regarding which orders can be placed on the alternative exchange. Brokers can only place orders for clients whose details are mapped at both exchanges. This ensures that the trading system remains streamlined and consistent, with brokers complying with all regulatory norms.
The NSE circular specifically warns brokers not to place orders for securities listed exclusively on BSE if they are members of NSE. Violations of this rule may result in disciplinary action against the broker. This regulation ensures that each exchange maintains its own rules and standards and prevents any cross-border regulatory conflicts between the two exchanges.
If an affected exchange resumes operations during the trading day, both exchanges will continue trading simultaneously. Before the backup mechanism is triggered, exchanges will issue widespread communication to ensure that all stakeholders are aware of the situation and can adapt accordingly.
Brokers must comply with specific order placement rules when using alternative exchanges.
NSE members are prohibited from placing orders for BSE-exclusive securities.
Mock Trading Sessions and SEBI’s Long-Term Vision
To prepare for this new backup mechanism, mock trading sessions were conducted on March 29, allowing market participants to test the system’s efficiency and functionality. This exercise was essential to ensure that the mechanism would work as expected and minimize the risk of any technical glitches during its actual implementation.
The proposal for this alternative trading mechanism has been under discussion with SEBI for some time, with the regulator issuing a detailed circular about the initiative in November 2024. The system has been implemented after ensuring that all technical and operational requirements are met, marking a significant milestone in India’s financial market reforms.
The introduction of this backup trading system is part of SEBI’s broader efforts to improve interoperability across exchanges, ensuring that financial transactions continue smoothly even in the face of disruptions. This will increase investor confidence in India’s capital markets and further establish the country as a reliable destination for global investments.
Mock sessions on March 29 ensured the system’s readiness.
SEBI aims to improve interoperability among exchanges to ensure market stability.
