SEBI sets new rules to prevent flash crashes

MUMBAI Fri Dec 14, 2012 9:40am IST

People walk outside the Mumbai Stock Exchange building February 10, 2011. REUTERS/Vivek Prakash/Files

People walk outside the Mumbai Stock Exchange building February 10, 2011.

Credit: Reuters/Vivek Prakash/Files

Related Topics

MUMBAI (Reuters) - Market regulator Securities and Exchange Board of India (SEBI) unveiled a new set of measures, including reducing the trading band for a wide category of stocks and capping single orders at nearly $2 million, to prevent future flash crashes.

The measures unveiled late on Thursday come after an erroneous trade order of more than $125 million from a broker at Emkay Global Financial Services sent shares sharply lower in October.

Analysts said the measures were unlikely to have a wide impact on stock volumes, although markets may react at the open.

"There may be knee jerk reaction to this move for the market, but it would not matter a lot," said Anup Chandak, senior manager of the advisory division at Sharekhan.

"Brokers and HNIs might be worried as exits would get difficult in a bad market," he added, referring to high net worth individuals.

Under SEBI's new guidelines, stock exchanges will not be able to accept single orders for stocks, equity derivatives or exchange traded funds of more than 100 million rupees.

In addition, the regulator narrowed the trading band for stocks that also trade on derivatives markets to 10 percent from 20 percent, although exchanges will be able to adjust the band in increments of 5 percent depending on market conditions.

SEBI also directed brokerages to set internal limits on the cumulative value of unexecuted orders, while directing them to reduce risk when 90 percent of the collateral for margin trading is utilised.

(Reporting by Abhishek Vishnoi and Rafael Nam; Editing by Gopakumar Warrier)

FILED UNDER:
  • Most Popular
  • Most Shared

Record Deal

REUTERS SHOWCASE

Coal Industry

Coal Industry

India to allow foreign firms mine and sell coal - coal secretary.  Full Article | Related Story 

Ranbaxy in U.S.

Ranbaxy in U.S.

U.S. court overturns bid by Ranbaxy to block launch of rival generic drugs.  Full Article 

Edible Oil

Edible Oil

Indians get taste for branded edible oil as prices drop, incomes rise.  Full Article 

Financial Tech CEO

Financial Tech CEO

Financial Tech founder steps down as CEO   Full Article 

Canpotex Deal

Canpotex Deal

Canpotex signs potash sales deals to India  Full Article 

Tech Acquisition

Tech Acquisition

Tech Mahindra to buy U.S.-based network services operator for $240 million   Full Article 

Fired for Overbilling

Fired for Overbilling

Infosys unit's overbilling Apple led to exit of top execs - sources.  Full Article 

Real Estate Investment

Real Estate Investment

JM Financial subsidiary gets $87 mln from Vikram Pandit-led fund  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage