Seamless trading: SEBI allows NSE, BSE to act as alternative trading venue on outage on one exchange  

Capital market regulator Securities and Exchange Board of India (SEBI) on November 28 gave go ahead to NSE and BSE to act as alternative trading venue at the time of outage on either exchange. The interoperability for cash, derivatives, currency derivatives, and interest rate derivatives will be effective from April 1, 2025.  

According to a circular issued by SEBI today, the plan will begin with the NSE acting as an alternative trading platform for the BSE, and vice versa. Both exchanges are required to create a joint SOP that includes the steps to be followed during an outage, along with the necessary coordination and responsibilities. 

To implement this, both exchanges are required to develop a Standard Operating Procedure (SOP) within 60 days. This SOP must outline the plan to be enacted during an outage, as well as the roles and responsibilities of the affected exchange and its alternative venue. 

The circular further mandates that the SOP address any changes to the systems of stock brokers and clearing corporations, which may be needed to ensure smooth implementation. 

Traders would be able to hedge their open positions by taking offsetting positions in identical or correlated indices on other exchanges, said Sebi. 

“Since the segments are interoperable, offsetting positions at the alternative venue will net off open positions for clients, thereby releasing the margin. No additional treatment will be required for these products,” the circular stated. 

For securities exclusively listed on one exchange, the other exchange may create reserve contracts to be activated in the event of an outage. 

The interoperable segments include the cash market, equity derivatives, currency derivatives, and interest rate derivatives, among others. 

In the event of an outage, exchanges are required to notify SEBI within 75 minutes and activate their business continuity plans. The alternate trading venue must be operational within 15 minutes of notification. 

Exchanges that do not have a highly correlated index derivative product with the other exchange should consider introducing such an index and its derivatives, in line with regulatory guidelines. This would allow positions in index derivatives to be hedged during an outage on the affected exchange. 

Finally, an exchange experiencing an outage must inform both the other exchange and SEBI about the initiation of the business continuity mechanism within 75 minutes of the disruption.