By Ruma Dubey

BSE very abruptly halted trading today morning. Every newspaper and website, TV news channels had promptly put out ‘Breaking news’ announcing the shutdown and in a way spread some short lived panic.

Technical network outage snags, HCL had explained. It was chaotic for a few minutes and then it was trading only on the NSE. One should not call it trading at all because it was so token; it hardly moved – listless, lackluster almost static.

And that made us think – NSE has long ago surpassed BSE, in terms of volume trades and officially, it is the largest stock exchange of India in that sense. Many have argued earlier that BSE is like a legacy of the past – just carrying on. If that was indeed so, how come the closure of BSE today for a couple of hours affected the NSE today? All volume from the BSE also should have shifted to the NSE, instead the trading there too came to a standstill. So in that sense does the NSE need the BSE for its volume growth? Clearly, they complement each other and cannot be taken as competitors to that extent.  There exists a sense of market integration between BSE and NSE and there is no doubt that they strongly influence each other.

Many were quick to criticize the BSE, saying that such things go on to project a very shoddy image of India amongst the FIIs. It was put down pretty severely by many analysts as a ‘typical Indian’ thing to happen. But isn’t that being too harsh? Technical snag should not happen but after all it is a computer and it does misbehave once in a while and this is the uncertainty we have to deal with when we depend on technology.

Remember the ‘flash crash’ on the NSE in October’12 caused by Emkay Global which dragged down the NSE by over 15% and had to be shut down for a few minutes. That was the second time it had happened- earlier in April’12, there was a similar ‘freak error’ where the Nifty fell 7% within seconds due to a wrong sell order executed.

And talking about it being an ‘Indian’ thing, last year in August, the Nasdaq, the second biggest stock exchange of USA, shut down for trading abruptly for three hours due to a computer glitch. And mind you, that was the third glitch in the same week – earlier it was a glitch linked to the trading arm of Goldman Sachs and there was another shut down due to a computer error. So Nasdaq had three shutdowns in the same week last year; isn’t that worse off that BSE or NSE? Have we judged the quality of USA based on this glitch? So why are we quick to jump onto the India bashing bandwagon the moment something happens here?

The truth is that one should expect this to happen once in a few years; after all the computer systems underlying the modem trading are so complex that something is bound to crack, some time or the other.

It is too dramatic to say that this does not augur well for the BSE which is trying to take on the NSE. In fact, the NSE was also affected, right? Yes, what is not right is if this happens frequently as persistent shutdowns would erode the faith where people will lack the confidence to place any trade. It is easy to say that there should be a backup to ensure seamless trading – how does one know what breaks down in the system so complex?

The good part is that thankfully the BSE got back on track and resumed trading from around 12.45 pm, first with a pre-opening session wherein  participants could place orders at realistic prices or prices prevalent on the NSE; the shutdown was for a little more than three hours.

All’s well and that ends well for another day of trades – currently lackluster, almost uncertain, stung by the shutdown.