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The decision by the National Stock Exchange (NSE) to halt trading for a few hours on February 24 due to a technical glitch must have come as a rude shock to traders and investors who were active on the platform when the snag hit.

Fingers have been pointed at the exchange for not having dealt with the problem properly and that halting of trading may have been an overreaction on part of NSE causing anxiety among traders who had open positions.

NSE will now have to do a thorough analysis of the reasons that led to the halt in trading. The market regulator, the Securities and Exchange Board of India (SEBI), has also directed the exchange to do a “root cause analysis of the trading halt and also to explain the reasons for trading not migrating to the disaster recovery site, as per the prescribed norms.”

There are some questions that need to be answered. Firstly, could a trading halt be avoided? The investing community which reposes huge faith in the leading stock exchanges in the country – NSE and BSE – and should also be willing to give the benefit of the doubt to the exchange. Halting perhaps was the best option to ensure that the initial problems that were spotted did not lead to a larger contagion that would be even more difficult to manage.

As SEBI itself has pointed out ‘NSE took this decision based on its own internal assessment regarding the severity of the technical issues it was experiencing at that time.” The investing community must appreciate that given the situation, NSE must have acted in good faith to protect their interests and taken the best decision possible after evaluating all options. It is never a easy task for exchanges to halt trading midway during trading sessions given the difficulties it may cause to investors.

Secondly, did traders have any option outside NSE to square of their positions? As SEBI said, there was a spike in trading on the BSE where volumes jumped to Rs 40,600 crore on February 24, 2021 as compared to an average daily trading turnover of approximately Rs 5,200 crore during the previous 30 days. This, it said, was courtesy the interoperability framework put in place by the regulator to trade on alternative exchange. On this count too, the system has worked in favour of investors to ensure that they do not face any losses on account of the glitch and its impact.

Thirdly, is this an unprecedented event among global exchanges? It isn’t. Technology glitches that led to halt of trading have happened in exchanges in the many advanced geographies, including USA and Japan. Not so long ago In October 2020, trading at Japan’s stock exchanges was halted due to technical glitch. In July 2015 trading in the New York Stock Exchange was halted for four hours due to technical issues. There have been similar issues in Shanghai, New Zealand and Singapore that impacted trading.

While we will have to wait for the outcome of the report, on the face of it seems accusing NSE of not being on the ball during the crisis seems to be an overreaction itself. The glitch was caused by a failure on the part of the telecom providers and NSE cannot be directly accused of negligence.

However, accountability needs to be fixed if there was any failure on the part the exchange. NSE would also have to find ways to provide trading alternatives in such disaster situations in future if ever they arise.

The NSE has been at the forefront of adoption of state-of-the-art technology to facilitate trading on its platform. Millions of trades go through it every day seamlessly and the exchange has facilitated scores of traders in creating wealth during its nearly 30 year existence. The investing community should see exchanges as their partner in the wealth creation journey.

For NSE, it was just a bad day in office. This experience will certainly help it to upgrade its platform and disaster recovery systems that will only benefit the investing community in future.

(Views expressed are personal)