Today at around 10:06 AM on 24th Feb 2021, NSE exchange feeds for Nifty, Bank Nifty and other indices stopped across all brokerage firms in India. But trading continued until 11:40 AM, after which NSE completely halted trading, with no prior warnings. This was also across all brokerage firms. SEBI has sought a root cause analysis from NSE for today’s issue, and we will update this post as soon as that is published.
A lot has been said about what we should have done on 24th Feb 2021 when NSE halted trading. Of course, with hindsight, it is easy now to suggest. But at 3 PM on the 24th Feb, the best option was to square off all NSE intraday positions on BSE.
Here’s why 1/n
— Nithin Kamath (@Nithin0dha) February 27, 2021
While trading came to a halt at NSE, clients 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 & CO could not exit their positions.
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.
Since 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 & CO positions on BSE with the NRML product type. After exiting, clients would have seen the original MIS/CO long/short position on NSE and the opposite NRML position on BSE. We informed everyone to ignore the new position as it was essentially an exit position for existing MIS/CO NSE positions. All other brokerage firms followed the same policy to close NSE intraday equity positions on BSE for customers.
Due to the extraordinary circumstances of the day, we have waived off the square-off charges of Rs. 50 for all the intraday equity and F&O square-off orders today.
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. Many may not have paid attention to the constant push notifications that we had been sending to ignore the BSE NRML positions created to exit the NSE intraday positions. These BSE NRML positions used to exit would have blocked additional margins, which didn’t allow further trading. Also, Kite charts for equity and F&O are wired to work only till 3.30 PM. Similarly, a bunch of other things have been built with a certain time in mind. It took us a few minutes post 3.45 PM to make them all work after normal hours.
In gist, for all your NSE equity intraday trades that were open before NSE halted trading, the exit trades would be the BSE NRML trades. So instead of a normal day when square off happens on the same exchange, today it happened at around the same time on a different exchange. This will show up in your contract notes. Tomorrow morning, you will not see these BSE NRML positions on Kite. Since markets were open from 3:45 PM to 5 PM, there was sufficient time to exit all intraday F&O positions on NSE.
Looking back at today, if NSE had informed brokers of a potential reopening or extension of trading hours, at least by 3 PM, we, along with many other brokers 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. We will update this post as soon as we get additional information on the cause of today’s events.