SEBI’s New Guidelines: NSE and BSE to Act as Alternative Trading Venues

The Securities and Exchange Board of India (SEBI) has rolled out new measures to ensure trading continuity during technical outages at stock exchanges. The initiative has been taken to reduce disruptions and safeguard investor interests during unforeseen technical issues by designating the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) as alternative trading venues for each other.

Role of NSE and BSE in the Framework

Under the new framework, both the NSE and BSE will serve as alternative platforms for each other. This means that in the event of an outage at one exchange, the other will step in to facilitate trading. SEBI’s decision comes after discussions with both exchanges, which have agreed to the plan. This collaborative approach ensures that trading activity continues even in the face of technical failures.

Standard Operating Procedure (SOP) for Outages

SEBI has mandated that both exchanges prepare a joint Standard Operating Procedure (SOP) to define the steps to be taken during technical outages. This SOP will outline the roles and responsibilities of each exchange, the flow of activities during an outage, and any necessary system changes. The SOP must be submitted within 60 days of the circular’s issuance.

Risk Mitigation for Investors

The primary goal of this initiative is to protect investors who may have open positions during an exchange outage. In such cases, investors could face risks from price fluctuations caused by material news or other events. To address these risks, the new framework leverages the interoperability of clearing corporations, enabling investors to hedge or net off their positions on an alternative exchange.

Provisions for Exclusively Listed Scrips and Products

For shares that are listed exclusively on one exchange or products without correlated counterparts on other platforms, SEBI has laid down additional provisions. Exchanges are required to create reserve contracts or introduce correlated index derivatives, ensuring that hedging options remain available to investors even in these cases.

Implementation Timeline

The provisions of the new framework are set to come into effect on April 1, 2025. This timeline allows exchanges and clearing corporations adequate time to develop the necessary infrastructure and make the required amendments to their by-laws to facilitate the implementation of these measures.

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Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.