Capital market regulator SEBI (Securities and Exchange Board of India) said on Wednesday it would introduce regulations for the cancellation or modification of trades arising from any instances of erroneous trades on the stock exchanges.
The regulator proposed a framework for cancellation or annulment of trades to deal with the growing instances of freak trades.
The trades undertaken on the stock exchange are treated as final and their settlement is guaranteed by the clearing corporation of the stock exchange. Stock exchanges, however, under exceptional situations have annulled trades undertaken on their platform. Prevention of erroneous orders forms an important part of the risk management framework of the stock exchanges, SEBI said in a notification.
An erroneous trade is a transaction executed either by a punching error by a market dealer or through malfunction of a trading system.
SEBI has invited feedback from stock exchanges and other market participants on how best to regulate the aftermath of these errant trades.