NSE glitch: Zerodha says trades squared off to avoid leveraged positions, short delivery, penalty

Clients of the country’s largest broker Zerodha have vented their ire over NSE’s technical glitch on Wednesday on social media for the losses they had to encounter on the penultimate day of F&O expiry.

Trading at the NSE halted for most of the normal trading hours post 11:40 am for which the exchange blamed the telecom service providers. The issue started sometime post 10 am as tickers for all indices including the Nifty stopped getting updated. However, at 11:40 am trading was halted for both the cash and F&O segment on the NSE though the BSE continued to function normally.

An individual on Twitter said, “@NSEIndia -Who will compensate for today’s loss and why did @zerodhaonline?/ @ZerodhaVarsity / @TradersZerodha/ @Nithin0dha squared off my position in @BSEIndia at 3.14pm at a lower price when @NSEIndia extended it’s trading hour till 5 pm?.”

“I will urge everyone feeling cheated today by @zerodhaonline to post the losses screenshot..they auto squared my MIS position to NRML in BSE without my consent and I lost 3197.45,” said another.

While trading came to a halt at NSE, market participants could continue to trade on BSE for fresh equity purchases and sales. Almost all the stocks that trade on NSE also trade on BSE. Thus, there would be no issues for people wanting to take fresh trades in equities. However, customers who trade F&O on NSE and equity on NSE using intraday products like MIS and CO could not exit their positions.

Explaining the stand, Zerodha said, “While there was nothing we could do about the intraday F&O positions on NSE, at around 2.30 pm, we sent a message to all our customers that we will exit the intraday equity NSE positions on BSE. This was important (and in the clients’ best interest) because these positions could have led to leveraged positions, short delivery and huge auction penalties if held overnight.”

“There were no further updates from NSE on the possibility of a reopening or an extended session, around 3:10 pm we squared off all NSE MIS and CO positions on BSE with the NRML product type,” the discount broker said.

Due to the extraordinary circumstances, Zerodha also waived off the square-off charges of Rs 50 for all the intraday equity and F&O square-off orders on Wednesday.

Around 3:17 pm, after we had squared off all intraday equity positions along with most other brokers, NSE abruptly informed all brokers that they would open for trading at 3:30 pm (pre-open), and there would be an extended trading session from 3:45 pm to 5 pm. While the extended trading session thankfully helped a lot of the F&O customers exit their positions, it created quite a bit of confusion among customers whose positions had been squared off,” Zerodha added.

Zerodha further added that if NSE had informed brokers of a potential reopening or extension of trading hours, at least by 3 pm, they would not have had to take risk mitigation measures and square off positions on BSE.

“Unfortunately, because there were no updates given to brokers, we had no other choice. The last-minute notification of the trading extension at 3:17 PM came a little too late,” the brokerage added.

On the other hand, Angel Broking in its blog said it took a call to wait for communication from the exchanges and Sebi rather than square off all intraday cash positions on the BSE.

Meanwhile, the largest stock bourse NSE on February 25 said the unavailability of an ‘online risk management system’ led to the nearly 4 hours shutdown of trading on February 24.

It is also awaiting a detailed root cause analysis from its telecom service providers and vendors regarding the incident, the exchange said.

Explaining the series of events leading to the shutting down of trading, the NSE said it has multiple telecom links with two service providers to ensure redundancy and the two telcos informed it about “instability of all their links”.