Key Takeaways
- SEBI likely to penalise MCX for 4-hour trading outage
- Outage caused by capacity breach during trading spike
- Bullion traders report significant losses due to disruption
- MCX says systems stable, has taken preventive measures
India’s markets regulator SEBI is expected to penalise the Multi Commodity Exchange (MCX) following a four-hour trading outage on Tuesday. The disruption, caused by a massive trading spike that breached system capacity, has drawn regulatory scrutiny over the exchange’s handling of the incident.
System Capacity Breach Identified as Cause
According to two sources familiar with the matter, the outage resulted from a “capacity breach” where MCX systems couldn’t handle the volume of clients trading that day. The sources, who spoke anonymously as they’re not authorised to speak to media, revealed that SEBI didn’t respond to emailed queries about the incident.
MCX acknowledged on Friday that its systems had predefined parameters limiting “unique client codes” which “led to constraints beyond the threshold.” The exchange maintained that its trading systems remain stable despite the incident.
Regulatory Concerns Over Response Delay
SEBI is particularly concerned about MCX’s delay in identifying the cause of the trading halt. The regulator may direct the exchange to enhance its system capacity. “Had MCX early on Tuesday identified that it was facing a capacity breach, trading could have resumed much faster,” one source stated.
Although SEBI mandates shifting to disaster recovery sites during main exchange halts, this measure proved ineffective. “Since the root cause was capacity breach, it continued to persist in disaster recovery site as well due to the volume spike,” the source explained. MCX has since implemented measures to prevent recurrence.
Traders Suffer Heavy Losses
The trading disruption caused substantial losses for bullion traders, prompting them to approach the India Bullion and Jewellers Association (IBJA) to intervene with regulators. An IBJA official noted that trading delays and halts on MCX have become increasingly frequent this year, resulting in trader losses.
A Mumbai-based bullion dealer described being forced to absorb larger losses due to the operational delay. “Gold and silver prices were correcting in the global market. Everyone, including us, who held long positions wanted to exit quickly, but we couldn’t,” he lamented.
