Sebi rolls out steps to avoid flash crashes

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Sebi rolls out steps to avoid flash crashes
The market regulator has finally rolled out steps to prevent incidents of flash crash on bourses and with its new set of guidelines, Sebi has prescribed multi-level checks before a big order is placed and dummy filters for stocks that can be traded in the futures & options (F&O) segment.

According to the new norms, the value of the order would be checked first and if it exceeds Rs 10 crore, then it would not be accepted in normal market. This guideline will help avoiding the error made by Emkay Global trader in October that had sent NSE's benchmark Nifty crashing 900 points down wiping out huge wealth of investors in just minutes.

Sebi prescribed that the next check would be on the margin available with an exchange. When the margin deposited by a trader with exchange gets 90 per cent used with his total position in the market, then his further unexecuted trades would stand cancelled until additional margins are deposited with the exchange.

The Sebi circular said when a broker was put in that mode, only those orders that had 'immediate' or 'cancel' attribute would be permitted. Normally such orders are placed under algo trading.

Besides, Sebi has asked the bourses to implement these measures in phased manner to ensure adequate control while using latest technology in exchanges.

Read more about: sebi
Story first published: Friday, December 14, 2012, 14:30 [IST]
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