SEBI is contemplating to reduce the circuit filters on stocks forming part of the NIFTY, SENSEX and futures to a notional value of 8% against the present 20% limit. These are notional limits because these stocks can rise or fall any level as they are part of the indices and futures. This is in response to the flash trade which occurred on Friday the 5th of October 2012. Readers would remember that on that day the NIFTY fell a staggering 900 points before trading was halted manually.

What was not told was that with the circuits already in place trading should have stopped at a fall in the NIFTY at 10% which is 570 points. It did not happen and even the second trigger at 15% (10%+5%) did not happen. This should have been triggered at a fall of 855 points on the NIFTY. The NSE cash market came to a halt at 900 points or a fall of 15.79%.

The changing of circuit filters does not address the issue of why did the market fall not trigger a stoppage of trading? Having notional circuits at 20% or 8% is inconsequential. The fault of the system needs to be addressed and it appears in not accepting a systems failure we are addressing irrelevant issues.In the greater interest of the markets, its safety and the greater benefit of stakeholders NSE come clean with what happened on the 5th of October at around 9.50 am.

One hopes the SEBI appointed committee to do fact finding on the failure does submit its report at the earliest and resolve the real problem.