The National Stock Exchange of India Ltd. has given a fair warning to the stock mediators on carrying out an order which seems to be disingenuous and can lead to divergence in the normal price discovery of the process.
The biggest stock exchange in India raised the alarm after seeing a ‘fat finger’ deal suffering from a loss of Rs 200-250 crores on June 02, 2022. This heavy loss was suffered by a stockbroker firm. As per reports, this seems to be the largest loss faced by the brokers market till date.
According to market jargon, this trade resulted in a wrong action due to pressing an incorrect key.
The NSE has mentioned in its notice that the stock mediators should rigidly avoid implementing any deal which has a disingenuous appearance in the first place for themselves and their clients and also abstain from doing anything which can cause deviation in the record book.
The brokers are told by the exchange that they should set up appropriate internal systems and procedures to make sure that any such deal has not been placed on the trading system of the exchange. This procedure includes deals made through algorithmic trading too.
The NSE further told the brokers that if any of them fails to maintain the circular, legal action will be taken against the person and that might include his or her departure from the trade platforms
Moreover, the NSE said that there have been cases when some stock mediators did place the deal on the NSE platform at a cost that was quite higher than the then market price and did not even match the last market price. These high prices struck the highest end of the transaction range explained by NSE. The NSE also claimed that sometimes few brokers placed deals at a price that did not match the current market price.
Furthermore, the exchange said that a few of the transactions which struck the highest end of the operating range are kept inert in the order book and these deals have led to the divergence in the order book.
According to NSE, these conducts by the brokers are against the law.
The issue with these orders is that the potential risks increases. As per the report above and beyond 2 dozen stock mediators have failed to honor in the last few years and many others are joining this list of defaulters.
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