Sebi issues SOP to stock exchanges on trading hours, outages

Market regulator Sebi (Securities and Exchange Board of India) has issued a standard of procedures (SOP) to stock exchanges in order to curb increasing instances of outages, and regarding the extension of trading hours due to the outage.

In its circular, Sebi says that any stock exchange that suffers the outage will have to intimate about it to stakeholders, including market participants, trading members, other market infrastructure institutions (MIIs), and Sebi. They must inform within 15 minutes of the outage via a broadcast message or by publishing on its website. To Sebi, the glitch must be informed immediately via an email at techglitch@sebi.gov.in. Sebi's circular will come into effect immediately.

The affected stock exchange will also have to update about the ongoing outage in 45 minutes to restore the operations as soon as possible. 

Trading hours of stock exchanges are pre-defined and known to all market participants, including the other MIIs. This helps them carry out trading activities in securities. "If due to any technical reason or otherwise, continuous trading on stock exchanges is disrupted, it is of paramount importance that not only all market participants, including other MIIs, are promptly informed about the outage but also the trading hours are extended, if required, so as to provide the opportunity for smooth closure of intraday positions," the Sebi circular said.

If an event disrupts trading in one or more market segments, the trading in other unaffected segments must continue, adds Sebi. The regular says a pre-opening session similar to a normal pre-opening session should be conducted for "effective price discovery" before resuming the trade. "Further, there shall be an advance intimation of at least 15 minutes to various market participants with regard to the resumption of trading or start of a pre-opening session."

If trading on the affected stock exchange resumes within at least one hour -- excluding 15 minutes of the pre-opening session -- before the normally scheduled market closure, trading hours will remain unchanged on that day.

If the trading does not resume even in an hour, trading hours will automatically get extended for additional “one and half hours” for that day. The affected stock exchange must inform market participants, latest by an hour and 15 minutes before the normal scheduled market closure. They also must issue a notice on the extension of trading hours on their stock exchanges.

Further, if the outage happens in the last trading hour or 15 minutes before market closure, trading hours will automatically get extended by one and a half hours for that day. All stakeholders must be informed immediately but not later than 10 minutes before the outage. The unaffected stock exchanges will also have to issue a notice on the extension of trading hours.

Sebi has also asked stock exchanges to formulate a "common close-out policy" in the next 30 days for a uniform methodology of the settlement of open positions in case continuous trading doesn't happen in the cash market or equity derivative segment during the last half an hour of trading for the day due to outage.

The extension of trading hours for the cash market would result in the equivalent extension of trading hours in the equity derivative segment and vice versa, provided trading hours are aligned for both the cash market and equity derivative segment, says Sebi.