Order verification system to check abnormal trade

By Our Special Correspondent

MUMBAI, JULY 4. The Securities and Exchange Board of India (SEBI) today asked the stock exchanges to monitor abnormal trading in the 53 most actively traded shares, following suspension of trading on the National Stock Exchange soon after the session commenced.

According to a release, ``A system of price and quantity validation at order level should be introduced by the stock exchanges. The system should verify quantity and price beyond certain limits as may be prescribed by the stock exchanges for different securities. The order then should be examined by the stock exchanges before permitting its execution. This would be applicable to all the 53 securities in which there is no price band.''

These are the securities in which scrip based option is available and these are included in the BSE Sensex and the S&P CNX Nifty in which futures and options are available.

Today trading was suspended after the NSE Nifty soared by 40 per cent mainly due to a sharp rise in Reliance Petroleum which vaulted six times over its previous close and ACC by over 51 per cent. One share of Reliance Petroleum was traded at Rs. 300 compared with the previous close of Rs. 46.95 while 400 ACC shares were traded at Rs. 209 per share, higher than the previous day's close of Rs. 138. As a result, the NSE Nifty touched 1494.60, up 39 per cent over previous close of 1069.80. Trading in both securities was cancelled, an NSE release said.

According to the SEBI stipulation, index-based market-wide circuit filters will apply at three stages of the index movement in either direction at 10 per cent, 15 per cent and 20 per cent and trading will be halted for the rest of the day in case of a change - in either direction - of 20 per cent or more in the index. The NSE stated that ``The exchange has taken a serious view of non-genuine orders entered into the system by certain members. It is analysing the details of such trades that resulted in market stoppage and further course of action will be decided based on the outcome of such analysis.''

PTI reports:

Just two days after introducing the rolling settlement, stock exchanges will put in place an `order verification' system for 53 scrips, in which derivative products are available, to check `abnormal' price movements with immediate effect, the SEBI chairman, Mr. D. R. Mehta, said.

``Bourses will validate volumes, price and identity of parties in scrips where abnormal price movements are suspected (stocks on which options and futures products are traded) and exchanges will decide the limit for judging abnormality," Mr. Mehta told reporters after holding a meeting with BSE, NSE, CSDL and NSDL officials here.

Besides 31 stocks where individuals stock options were being traded, scrips of VSNL, BPCL and Sterlite would also be covered under the verification system. The circuit filters are not applicable for the 53 scrips, the SEBI chief said.

Exchanges have deactivated terminals of market participants who were involved in such abnormal transactions and ``they will take strict action against those found guilty'', he added.

Mr. Mehta said SEBI had asked the bourses to review the surveillance system and step up use of the stock watch system.

Mr. Mehta said trading volumes on the exchanges dipped on July 2, the first day of rolling settlement but they were up on the second day on NSE and BSE. The SEBI appointed Risk Management Group would meet on July 13 to review the margins that were being collected on the stocks in the rolling settlement mode, Mr. Mehta said.

The exchanges have been asked to ensure pay-in for stocks by 11 a.m. so that the pay-out could be made during banking hours on the same day, he said.

The capital market regulator would soon issue directive asking corporates to make payment of dividends directly to investors' bank account wherever details were provided, he added.

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