NSE to pay Rs 72.6 crore to settle February 2021 trading glitch case

The National Stock Exchange (NSE) and its arm -- NSE Clearing (NCL) -- has agreed to pay a total of Rs 72.6 crore to settle the case pertaining to the February 2021 trading glitch, which had halted trading at the country’s largest bourse for nearly four hours.

NSE and NCL will pay Rs 49.77 crore and Rs 22.88 crore, respectively, for themselves and their employees, who will also have to undergo non-monetary punishment.

On February 24, 2021, NSE had to halt trading in all its segments between 11:40 AM and 3:45 PM due to issues at its telecom service providers. The unprecedented shutdown had created panic in the market and had put traders and investors in a disadvantageous position. The exchange resumed trading at 3:45 PM after conducting a 15-minute pre-open session. Trading hours were extended to 5 PM on all the equity exchanges.

The Securities and Exchange Board of India (Sebi) had launched an investigation in the matter and subsequently issued show cause notices to the exchange and its employees.

Among the lapses identified by the markets regulator were failure of NSE to monitor services of vendors in respect of core and critical activities; failure to ensure readiness to move operations to disaster recovery site (DRS) and failure to ensure orderly execution of trades.

Sebi’s show cause notice also alleged failure on part of NSE’s crisis management team (CMT). Vikram Limaye, the then managing director and chief executive officer of NSE, Vikram Kothari, MD of NCL and Shiv Kumar Bhasin, chief technology & operations officer of NSE were part of the CMT at the time of glitch.

The three individuals have been directed to contribute to community service and take up specific training courses within six months.

All three “…after passing such exams/courses, will commit to pro bono community service of at least 14 days over the next year, furthering the cause of investor education and awareness, by actively contributing to specified programs that are conducted by and monitored under the aegis of Sebi's Office of Investor Assistance and Education,” the watchdog said in its settlement order.

The settlement applications by NSE, NCL and the three officials were made to Sebi between August 2021 and September 2021.

NSE, in its response to the regulator, had submitted that the technical glitch occurred on account of reasons beyond its control and the exchange could not have reasonably anticipated the problem.

"NSE and its management consciously chose not to move operations to DRS at Chennai on the day if the glitch is a prudent exercise of the discretion vested in them," said the exchange.

NSE further submitted that it had not compromised the market integrity and ensured zero data loss.

The settlement terms had been suggested by a high-powered advisory committee based on Sebi’s observations and NSE application.