SEBI Directs NSE And BSE To Act As Alternative Trading Venues Starting April 2025. What Does It Mean?

The SEBI said that the exchanges would prepare a joint Standard Operating Procedure (SOP) to handle scenarios where one exchange experiences a disruption

A move to bolster market resilience, the Securities and Exchange Board of India (SEBI) has mandated that the National Stock Exchange (NSE) and the BSE function as alternative trading venues for each other. The directive, issued through a circular on November 28, aims to ensure business continuity in the event of outages and will take effect from April 1, 2025.

Here are the key details of the circular

The SEBI said that the exchanges would prepare a joint Standard Operating Procedure (SOP) to handle scenarios where one exchange experiences a disruption. The SOP will outline the roles and responsibilities of both exchanges during such incidents, the workflow to be followed, and the operational plan for the alternative trading venue.

The SOP must be submitted to SEBI within 60 days of the circular's issuance.

Guidelines for Interoperable Segments

The circular also detailed specific measures for different market segments, including cash markets, equity derivatives, currency derivatives, and interest rate derivatives:

Common Trading Products

For scrips, single stock derivatives, and correlated indices available on both exchanges, participants can hedge their positions by offsetting trades on the alternative exchange.

As these segments are interoperable, such offsetting trades will net off open positions for end clients, releasing the margin and eliminating the need for separate treatment.

Exclusively Listed Scrips

For scrips and single-stock derivatives listed exclusively on one exchange, the unaffected exchange must create "reserve contracts" to enable trading continuity during outages.

Index Derivatives Without Correlated Products

Exchanges lacking highly correlated index derivatives products must develop such indices and introduce derivatives contracts in accordance with regulatory provisions. This would provide participants with an avenue to hedge positions during disruptions.

Notification Protocol

In case of an outage, the affected exchange must inform the other exchange and SEBI within 75 minutes of the incident, initiating the business continuity mechanism. This directive underscores SEBI's focus on enhancing market stability and minimising disruptions, ensuring that participants have alternative avenues for trading and risk management.