Emkay approaches Securities Appellate Tribunal against NSE order; hearing on Thursday
Brokerage firm Emkay Global has approached the Securities Appellate Tribunal (SAT) against an NSE order rejecting its plea for cancelling an erroneous trade that triggered a 900-point flash crash in market benchmark index Nifty last year.
The Tribunal will hear on Thursday Emkay Global's appeal, which has been filed within days of a disciplinary panel of National Stock Exchange (NSE) rejecting the brokerage's plea for cancellation of the infamous erroneous trades.
The erroneous trade on October 5, 2012 had led to a massive plunge of over 900 points in the NSE's benchmark index Nifty, prompting a temporary halt in overall market trading.
Emkay had to bear the losses, amounting to about Rs 51 crore, caused by this trade, but the brokerage firm later requested for annulment of the trade terming it as a one-off error.
These losses are much higher than the entire market value of Emkay Global.
"The Relevant Authority of NSE has denied our application for annulment of trades arising out of a clearly erroneous entry of sale order on October 5, 2012," Emkay Global said in a regulatory filing on May 2.
The NSE panel has also imposed penalties on two counterparties, Inventure growth and Securities and Prakash K Shah, in this case.
The brokerage firm had said earlier that it was considering legal course of action to challenge NSE's decision.
A sub-committee of the NSE board had found that "there was gross negligence, non-compliance and lack of internal control systems at the end of the member (Emkay Global)".
The panel felt that large sections of market could not be put at risk, because of a gross negligence by the member.
It noticed that more than 60,000 trades were executed, with 665 counterparty trading members and more than 14,000 clients, pursuant to the said erroneous trade order.
In spite of all the checks and balances appearing on the order screen, the order was okayed and partly executed and the order could have been corrected at various stages, the probe found.
On the day of the flash crash, Emkay had said that "while executing an order to transact a Nifty cash basket, in Nifty-50, a dealer committed a bona fide error.
"The error was in entering the value of the order as the quantity of Nifty-50 basket to be transacted. The order got transmitted to the NSE trading server as a single large Nifty basket order comprising Nifty 50 stocks.
"Immediately on realising the error, we promptly got in touch with the NSE and kept in touch with them to coordinate all future course of action until the entire erroneous outstanding position was closed out."
