India regulator to fine bourses for not swiftly acting on disruption

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The announcement late on Monday comes after the National Stock Exchange (NSE) in February went offline for nearly four hours, leaving investors clueless as to when trading would resume and drawing the ire of brokers forced to sell holdings..

The Securities and Exchange Board of India (SEBI) in its announcement said stock exchanges, clearing corporations, depositories and their senior management will be fined for not promptly resolving issues or not submitting root-cause analyses within 21 days.

An entity’s failure to declare disruption to critical systems as a “disaster” within 30 minutes, and failure to restore operations within 45 minutes, will in each case attract a penalty of 20 million rupees ($269,070) or 10% of the average of the two previous financial years’ net profit, whichever is higher, SEBI said.

The managing director and chief technology officer of the entity will also be fined 10% of annual pay, the regulator said.

The penalties will encourage entities “to constantly monitor the performance and efficiency of their systems,” and avoid, or quickly tackle, disruption, SEBI said.

In February, during the NSE shutdown, some brokers said a lack of swift information on when, or whether, trading would resume prompted them to close intra-day equity positions on another exchange, leading to significant loss for some investors.

NSE said it had acted in accordance with standard practices.

($1 = 74.3300 Indian rupees)