EMKAY GLOBAL

2014C01 Rahul Singh Baghel

2014C02 Ridhhi Sanghi
2014C19 Vani Saksena
2014C39 Akshita Kedia
2014C41 Anirudh Rangarajan
2014D09 Munish Sharma

ABOUT EMKAY GLOBAL

Founded in 1995
Offers comprehensive Investment solutions to more than a lac satisfied
customers throughout the length and breadth of the country.
Current net worth Rs 130 crore
350 retail outlets, spread across the country.
Membership - BSE, NSE, MCX-SX, CDSL, NCDEX, ICEX, NSEL.

WHAT EXACTLY HAPPENED?

Oct 5, 2012 The market
opened normally and Nifty
opened at 5,815
When the markets were
expected to keep going up
forever because we have
new reform agendas, the
markets went curiously the
other way.
Stunned traders watched
the index fall over 10% no,
15%. Down to 4888.2 from a
close of nearly 5800 the
previous day.

WHAT EXACTLY HAPPENED?

- A FAT-FINGER TRADE
At 9:50:58 AM, the Nifty circuit filter got triggered, upon which the cash
market was closed automatically
The Nifty fall was apparently on account of the entry of59 erroneous
orders.
These orders were entered by a trading member at Emkay Global
Financial Services, on behalf of an institutional client which resulted in
multiple trades for an aggregate value of over Rs. 650 crore
Thesenon-algomarket orders have been entered for an erroneous
quantity which resulted in executing trades at multiple price points across
the entire order book, thereby causing the circuit filter to be triggered

WHAT EXACTLY HAPPENED?

- A FAT-FINGER TRADE
The operating phrase here is "non-algo" meaning these were trades that
were not algorithmic
How does NSE know?
It asks algorithms to only send their orders with a code that identifies
them as algos. And every algorithm must be approved by NSE
While the Exchange systems functioned normally without any glitch, the
above abnormal trades caused market closure automatically, due to the
index circuit filter getting triggered.
The market was reopened by the Exchange with a pre-open phase at
10:00:22 AM and trading resumed at 10:05:00 AM and the market
functioned normally

EMKAYSOFFICIAL
RESPONSE
While executing an order to transact a Nifty cash basket, in Nifty-50, a dealer
committed a bona fide error. The error was in entering the value of the order as the
quantity ofNifty-50 basket to be transacted.
The order got transmitted to the NSE trading server as a single large Nifty basket
order comprising of nifty 50 stocks. Immediately on realizing the error, we promptly
got in touch with the NSE and kept in touch with them to co-ordinate all future course
of action until the entire erroneous outstanding position was closed out.
All our remaining clients outstanding positions are intact and we will continue to
service all obligations. We are hopeful that this obvious and apparent error would
justify the annulment of these trades, and believe in the NSEs professional
management to see the merits for annulment, which is the practice worldwide. The
NSE has disabled trading for us to facilitate investigations and primarily to prevent
any further exposure until this settlement is completed

FINANCIAL IMPACT
The error was caused by a dealer at the brokerage, which faces a Rs 51crore hit, equivalent to its net profit for the past six years
While Emkay, which made repeated representations for cancellation of
the trades, will have a significant part of its cash balance wiped out, a set
of investors who had punched in 'buy' orders made windfall gains as their
trades were executed after the market crashed due to the error

FINANCIAL IMPACT
Volume Doubled
The volume of stocks in the benchmark index that were traded almost
doubled from the 100-day average, according to data compiled by Bloomberg.
Anindexof Indian stocks traded in New York slipped as much as 1.2 %
Shares Plunge
The brokers shares plunged by the 10% daily limit to Rs. 31.1
About 20 stocks in India saw declines of 9 % or more on Oct. 5, compared with
the more than 300 securities that lost at least 60 % during the flash crash
before the trades were canceled.
The decline and rebound in the Nifty lasted seconds, compared with more
than 15 minutes for stocks, futures and indexes in the flash crash

PREVENTIVE MEASURES
Since the trades were on the Nifty index, which has 50 stocks, its very surprising
that there were 59 orders that were "rogue" a basket order should only send in
50 orders, or a multiple, even if it was a fat finger
WAS THIS LEGAL?
Of course! An order of that size SHOULD bring the market down, fat finger or
otherwise. The thing that helps is circuit breakers, and the Nifty circuit helped
Dynamic circuits can operate intelligently parallel to the market, ensuring that
large market orders are rejected at the fringe, with a mandatory minute or two of
a hold before they open up further
A stock that needs to fall due to fundamental factors will take about a half hour
to fall 80%, if it really should and the wait is indeed a good thing.

LEGAL AFTERMATH
"The panel feels gross negligence by a single member cannot be allowed to
impact 60,000 trades executed by 14,000 clients of 665 exchange members"
It was found that Emkay lacked adequate risk management systems that could
have blocked the erroneous order from being executed and did not avail of a
order cancellation facility provided by the exchange to annul the trades on the
same day.
Emkay now faces the prospect of paying Rs 51 crore to counterparties to the
erroneous trade, which dragged down the Nifty by 15% in a matter of seconds.
Emkay had two counterparties to the erroneous trade Prakash K Shah Shares
& Securities and Inventure Growth & Securities
Emkay and Inventure have been fined Rs 25 lakh each and PK Shah Rs 20 lakh.

THANK YOU