SEBI directs exchanges to act harsh on frivolous trades

Market regulator Sebi has set out rules for annulment of trades undertaken on stock exchanges.

The regulator on Thursday said stock exchanges can either on their own or on request from a stock broker consider annulment of a trade.It should however define suitable criteria to discourage frivolous trade annulment requests from brokers.

“Stock brokers shall submit such request to the stock exchange within 30 minutes from execution of trade(s) which is sought to be annulled. However, stock exchange may consider requests received after 30 minutes, but no longer than 60 minutes, only in exceptional cases and after examining and recording reasons for such consideration,”.

Sebi has asked exchanges to inform details of such requests to all its stock brokers in a time bound manner.It should examine and decide on such requests not later than the start of the next trading day.

“While examining such requests, stock exchanges shall consider the potential effect of such annulment on trades of other stock brokers/investors across all segments, including trades that resulted as an outcome of trade(s) under consideration,”.

“As an alternate mechanism, stock exchanges may consider resetting the price of trade(s) under consideration to an appropriate price(s), if price reset is deemed to be a less disruptive mechanism as compared to trade annulment,”.

The regulator said exchanges should undertake annulment or price reset only in exceptional cases,after recording reasons in writing in the interest of investors,market integrity and maintaining sanctity of price discovery mechanism.

To discourage frequent or frivolous requests exchanges could charge an application fee equal to 5% of the value of trade for accepting annulment request from a stock broker. This is subject to a minimum fee of Rs 1 lakh and maximum fee of Rs 10 lakhs.

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