NSE warns brokers to be alert for ‘fat finger’ trades

Mumbai: The NSE has warned brokers that they should not place orders which are way above or below the prevailing market price, that do not seem to have any economic logic, nor those that are being placed at the extreme ends of the operating range as defined by the bourse’s rules.
The warning from the NSE came after a huge ‘fat finger’ trade, an error caused by punching a wrong key, on Thursday afternoon that led to an estimated loss of Rs 250 crore for a broker. The prices at which the Nifty options were sold were a fraction of the ruling market price at that time. A fat finger trade is an erroneous action due to a mouse misclick or punching a wrong key, which could lead to a huge loss for the one initiating the trade and a windfall gain for others.
A report on Friday evening said that Vardhaman Global Sharecom, the broker that had put in the erroneous trade, had written to markets regulator Sebi to look into this mistake. “Trades arising from such orders placed at unrealistic prices lead to aberrations in the normal price-discovery process,” the NSE circular said.
The bourse warned brokers to desist from putting in such trades. It also advised them “to put in place appropriate internal systems and procedures at their end to ensure that such orders / transactions are not placed on the trading system of the exchange”.

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