In a significant move to strengthen market infrastructure, the Securities and Exchange Board of India (Sebi) has announced the implementation of interoperability across stock exchanges, ensuring robust business continuity during technical disruptions. Effective from 1 April 2025, this initiative will cover cash, derivatives, currency derivatives, and interest rate derivatives markets.

 

Initially, the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) will serve as alternative trading venues for each other, providing traders with enhanced flexibility and risk management capabilities. Sebi has mandated that exchanges develop a comprehensive standard operating procedure within the next two months to facilitate this transition.

 

The new framework allows traders to hedge their open positions by taking offsetting positions on alternative exchanges, particularly in identical or correlated indices. This approach will enable traders to net off existing positions and release margins, eliminating the need for separate treatment of such transactions.

 

For securities exclusively listed on one exchange, alternate exchanges may create reserve contracts that can be activated during an outage. Where highly correlated index derivatives are unavailable, exchanges are encouraged to develop and introduce new index derivatives contracts to provide effective hedging mechanisms.

 

The directive includes stringent operational guidelines, requiring exchanges to notify Sebi within 75 minutes of any technical outage and invoke their business continuity plan. The alternative trading venue must be activated within 15 minutes of such intimation, ensuring minimal market disruption.

 

This innovative approach addresses potential market vulnerabilities by creating a flexible, interconnected trading ecosystem that prioritizes trader interests and market stability.