Wanting to void trades, NSE refuses to pay for freak trade by Emkay Global

National Stock Exchange (NSE) has withheld payment to a few beneficiaries of a freak trade by brokerage Emkay Global and may consider annulling these trades, said a few brokers aware of the development.

The incident, which took place in early trade on October 5, caused trading to stop for 15 minutes after the Nifty tumbled over 15% within seconds. It also burned a Rs 51-crore hole in Emkay's pocket.

In a recent letter to the trade's counterparties, the exchange has reportedly sought an explanation as to why the trades should not be annulled. Mumbai-based Inventure Growth & Securities and Ankit Financial Services are among the beneficiaries which confirmed having received NSE's letter.

An email questionnaire to NSE asking if it had indeed sent out letters to the beneficiaries went unanswered.

"...you and those of your clients on whose behalf the said trades have been executed are hereby called upon to offer your explanation as to why all or any or some of the said trades should not be annulled in accordance with the Byelaws, Rules and Regulations," the bourse reportedly wrote in the letter to the beneficiaries.

Ankit Financial Services, which made a profit of Rs 16 crore from the trade, has objected to the annulment in a letter to NSE.

"...the written request for annulment from Emkay is dated October 7, 2012. The exchange has never before in its letter dated December 7, 2012, intimated us that Emkay had requested for annulment.

In earlier meetings arranged by the exchange in its premises between Emkay and our broker, the exchange had categorically said it will not annul or settle the transactions at
revised price and that we will have to enter into separate arrangement with Emkay, to which exchange will not be an official party," the letter said.

Letters from NSE After Emkay Plea

"The exchange official also threatened our broker that if we do not enter into an outside settlement with Emkay, our broker will have to face severe consequences and actions from the exchange," the letter from Ankit Financial Services said.

The letters to these beneficiaries were issued following an application by Emkay, two days after the incident, which sought an annulment of the trade on grounds that it was an "inadvertent" punching error by a dealer while executing a basket order - buying or selling many scrips in a single order - for Templeton Mutual Fund.

Source & Credit :