In a significant move aimed at enhancing operational efficiency and investor protection, the Securities and Exchange Board of India (SEBI) has issued a comprehensive circular detailing the Standard Operating Procedure (SOP) for managing stock exchange outages and extending trading hours in the Commodity Derivatives segment. This circular, SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/62 dated May 27, 2024, builds upon previous guidelines established for the Cash Market and Equity Derivatives segments.
Background and Development
SEBI initially introduced protocols for handling stock exchange disruptions and adjusting trading hours in January 2023. Following the success of these measures in other market segments, SEBI's Commodity Derivatives Advisory Committee (CDAC) further deliberated and refined a tailored framework specific to commodity derivatives trading. The finalized SOP has been included as an Annexure to the latest circular.
Key Provisions of the Circular
1. Detailed Operational Guidelines: The circular defines a "Stock Exchange Outage" as the cessation of continuous trading, either initiated by the exchange or due to unforeseen circumstances. It outlines strict protocols for notifying market participants and SEBI about outages, ensuring transparency and prompt action.
For exchanges experiencing outages, the SOP mandates regular updates every 45 minutes until normal trading operations are restored. The stock exchange experiencing the outage must promptly notify the following stakeholders:
Market participants or trading members, within 15 minutes from the occurrence of the outage, using broadcast messages and/or by posting on its website.
SEBI immediately after the outage occurs, via email sent to the dedicated email address: techglitch@sebi.gov.in.
2. Procedures for managing exchange outages in the commodity derivatives segment are detailed as follows:
A. Contracts traded up to 5:00 PM / 9:00 PM:
- If trading operations resume to normal at least 30 minutes before the scheduled market closure (excluding a 15-minute notification period), trading hours will remain unchanged on that exchange. Market participants must be informed no later than 4:15 PM or 8:15 PM about the resumption of trading by 4:30 PM or 8:30 PM.
- Notifications to restart trading can be issued until 4:45 PM or 8:45 PM, respectively. These notifications will specify that trading will commence from 5:00 PM or 9:00 PM and continue for 30 minutes, extending trading hours until 5:30 PM or 9:30 PM. Details on when investors should log in to adjust their positions will also be included.
- Failure to notify market participants by 4:45 PM or 8:45 PM will result in no extension of trading hours.
B. Contracts traded up to 11:30 PM / 11:55 PM:
- Similarly, if trading returns to normal at least 30 minutes before the scheduled market closure (excluding a 15-minute notification period), trading hours will not be extended on that exchange. Market participants must receive notification by 10:45 PM or 11:10 PM regarding the resumption of trading by 11:00 PM or 11:25 PM.
- Notifications to resume trading can be sent until 11:10 PM. These notifications will state that trading will begin at 11:25 PM and continue for 30 minutes, extending trading hours until 11:55 PM. They will also provide guidance on when investors can or should log in to adjust their positions.
- Failure to notify market participants by 11:10 PM will result in no extension of trading hours.
Conclusion
SEBI's proactive approach through this circular underscores its commitment to maintaining market integrity and investor confidence in the Commodity Derivatives segment. By standardizing procedures for handling disruptions and extending trading hours, SEBI aims to enhance market resilience and ensure a fair and orderly trading environment.
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