Sebi to work on new policy to annul erroneous trades: Sinha

Sebi will work on a new policy to annul erroneous trades to prevent a repeat of last week's crash on NSE which had created a panic situation on bourses.

"I think we will work on a policy on trade annulment. It will take some time. I have already set up a group, which is looking into various aspects," Sebi chairman U K Sinha told reporters on the sidelines of a capital markets conference organised by Ficci.

He, however, said the proposed rules on annulment of trades will take some time as Sebi wants to be very cautious in the new structure it puts in place.

"Our risk management mechanism, put in place in 2000, has by and large withstood the test of time. We don't want to tinker with it in a hurry. We want to be very cautious in whatever structures we will come out with. We will not be in a hurry. We will do wide range of consultations, stress testing before we come out with any policy," Sinha said.

The chairman also said that Sebi would like to examine the matter in its entirety.

"Sebi has a prescription for certain internal checks and balances at the broker level, exchange level and the Sebi level. We would like to check whether any such checks and balances were not in place. This will be looked at very seriously. We will be doing stress-testing and scenario building," said Sinha.

The NSE had said a single dealer terminal at Emkay placed 59 erroneous orders for an institutional client, resulting in trades worth over Rs 650 crore on Friday last. It led to a chain reaction and caused a whopping 900 points or 15.5 per cent plunge in Nifty.

The exchange had suspended the brokerage from trading till Wednesday when it had paid up the penalties. NSE, however, did not annul the erroneous trades.

When asked whether the Sebi is probing the NSE crash, he said "We are looking into it very seriously right now. I am not using the word 'investigation'. But there is not much I can tell you about it".