After ‘big finger’ trade, NSE warns brokers against executing inauthentic trades

The main exchange NSE has warned stockbrokers against executing orders that appear not to be genuine, which would lead to a deviation from the normal price discovery process.

This came after the derivatives segment of the National Stock Exchange (NSE) witnessed a ‘big finger’ trade on Thursday which could have caused a loss of ₹200-250 crore to a brokerage. This could be the biggest trade mistake in the history of the internal market.

In market jargon, a “fat finger” trade is an erroneous action resulting from pressing the wrong key.

In a circular, NSE instructed its trading members to strictly refrain from entering into or executing transactions which, on the face of it, do not appear genuine on their own behalf or on behalf of their clients and to refrain engage in practices leading to aberrations in the order book.

They have been required to put in place appropriate internal systems and procedures to ensure that such orders/trades are not placed on the exchange’s trading system, including trades via algorithmic trading.

“Failure to comply with the circular will result in appropriate disciplinary action … which may include diversion from trading terminals,” the NSE said.

The exchange said there have been instances where few trading members placed orders on the exchange at prices that did not reflect the current market price and were far from the last traded price.

There are also instances where trading members place orders at prices that are at the extreme end of the exchange’s defined operating range and have no apparent economic justification relative to the last traded price, it said. -he declares.

Some of these orders, placed at the extreme end of the operating range, sit passively in the order book, NSE said, adding that “transactions resulting from such orders placed at unrealistic prices lead to aberrations in normal discovery. prices”.

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