It took less than a minue for India’s Nifty Fifty Index to drop nearly 16%. And it took erroneous trades totallying only $125 million to temporarily wipe out $58 billion in market value.
On October 5, the Mumbai-based broker Emkay Global mis-entered 59 trades in behalf of an institutional client. It apparently entered the value of the trades in the place where it should have entered the quantity. The orders involved a basket trade of the Nifty Fifty Index, an index that is comprised of 50 major Indian companies. Before trade was halted on India’s National Stock Exchange, the Nifty Fifty Index had dropped 900 points.
Prices on the exchange, and specifically the Nifty Fifty, recovered after trading was resumed. The price of Emkay Global’s stock — and overall investor confidence in market operations — did not participate in the rebound. But apparently India is going try to address the latter with the tried-and-true “stress test.” Sure, that’ll work.
Sources and Coverage:
National Stock Exchange of India Press Release
Financial Times, by Neil Munshi and Philip Stafford, Indian Shares Suffer $60bn “Flash Crash”
Wall Street Journal, by Ashutosh Joshi and Khushita Vasant, After “Flash Crash” India Aims to Bolster Market Systems