SEBI, on 28 November 2024 released a mandate, which is going to ease the life of traders and investors. From 1 April 2025, the two main stock exchanges in the country – NSE and BSE are going to work as alternative trading venues for each other. This is going to ensure continuity in trading and investment activities.
How will NSE and BSE Work as Alternatives?
SEBI and both the exchanges have discussed the process of how these exchanges will work as alternatives and it has been decided that the National Stock Exchange (NSE) will act as the alternative trading venue for Bombay Stock Exchange (BSE) and vice-versa. A joint SOP has to be prepared by both the stock exchanges and submitted to the SEBI within 60 days from the date of issue of the mandate. This is to include the plan details of how the exchange will work during an outage at the other exchange. For instance, if there is an outage at the BSE, then the NSE will be working as an Alternative to BSE and vice-versa.
This will mainly help in keeping the flow intact in the stock market and outages and downtime at any of the two exchanges cannot affect the businesses. The exchange working as an alternative at any given point will be taking over the roles and responsibilities of the other exchange, which is facing the outage.
The exchange, which will face an outage, needs to inform the other exchange, which will act as the alternative within 75 minutes and it should also inform SEBI.
SEBI’s Directions for Interoperable Segment
SEBI has issued the directions for exchanges’ interoperable segments such as cash market, current derivatives, equity derivatives, and interest rate derivatives.
- If both the exchanges have identical trading products such as stock derivatives, common scrips, currency or interest rate derivatives, or correlated products such as correlated indices then the trading participants can hedge any open positions they have on one exchange by having offsetting positions on the other exchange. Since this is for the interoperable segment, offsetting the position on the alternative trading venue will be a suffix and no other actions or treatment needs to be done by the market participant.
- For exclusive scrips of any exchange, the other exchange can create a reserve contract for that exclusive scrip/s. For the derivatives of that scrip/ stock, which is not traded on the alternative exchange, the participant can invoke when the primary exchange faces an outage.
- For index derivative products, which do not have correlated index derivatives on the alternative stock exchange, the exchange can create such an index and introduce a derivate on the same but it needs to be according to the regulatory provision. This can help the participants hedge their open positions in any index derivatives products when the actual exchange of the participant is facing an outage.
Wrapping up
This move by SEBI has come as a savior for most market participants who face issues due to outages at the stock exchanges. Once this is implemented from 1 April, it is expected to boost the business activity in the markets.
Source: MoneyControl
______________________________________________________________________________________
Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.