MCX faces Sebi penalties after trading halt due to system capacity breach
Multi Commodity Exchange (MCX) is likely to face penalties from the Securities and Exchange Board of India (Sebi) after a four-hour trading suspension on Tuesday, sources familiar with the matter said. The disruption resulted from a capacity breach as MCX’s systems could not accommodate the heightened volume of unique client codes, leading to operational delays. The regulator is also reportedly concerned about MCX's delayed identification of the root cause, which could compound the impact on market participants. MCX stated that it has implemented measures to prevent similar issues in the future, affirming that its trading systems remain stable.
The incident has prompted significant concern among traders, many of whom reportedly incurred losses during the halt. Several bullion traders have approached the India Bullion and Jewellers Association Ltd (IBJA) to escalate their concerns to Sebi. An IBJA official told news agency Reuters that trading delays and halts on MCX have become more frequent this year, negatively affecting traders. A Mumbai-based bullion dealer described the experience, stating: "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 said.
According to sources, Sebi may direct MCX to expand its system capacity to prevent future breaches. One source noted, "Had MCX early on Tuesday identified that it was facing a capacity breach, trading could have resumed much faster," the first source said. MCX explained that predefined system parameters, specifically the limit on the number of unique client codes, led to the disruption, saying, "which led to constraints beyond the threshold."
Although Sebi regulations require trading activity to be shifted to a disaster recovery site during such halts, this measure was ineffective in this instance. As another source explained, "Since the root cause was capacity breach, it continued to persist in the disaster recovery site as well due to the volume spike," the source said.
MCX identified the root cause of this week’s major trading disruption. The issue stemmed from a predefined parameter limit related to reference data such as Unique Client Codes (UCC), which exceeded system thresholds. MCX said it has implemented corrective measures to prevent future occurrences and confirmed that its systems are now equipped to handle growing market volumes.
The exchange reaffirmed its commitment to strengthening operational resilience through continuous investment in advanced technology to improve reliability, scalability, and performance. Trading had been delayed by over four hours on Tuesday, resuming only at 1:25 p.m.
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